Greencore results meet expectations

With its share price plummeting by almost 75% this year, Irish convenience food group Greencore disclosed a not unexpected drop in pre-tax profits of 30% for the year to the end of September, down to euro 41.8M from euro 55.3M. Sales rose over 3.2% to euro 1.31bn.

In its preliminary statement of results in November, Greencore said operating profits had decreased by 4.5% to euro 77.3M. It blamed euro 8.1M of the drop on the 12% depreciation in the exchange rate between sterling and the euro. Some 80% of Greencore’s operating profits were sterling dominated.

Greencore group chief executive Patrick Coveney said the results were a ”resilient response” to a challenging year which he said had seen double-digit food inflation, a dramatic weakening in sterling, declining confidence in all consumer markets and the “negative impact of a cost concealment issue” at its Scottish mineral water business.

In June, Greencore sacked three senior managers after uncovering what it believed was a euro 21M fraud at its Campsie Spring mineral water business. It warned at the time that the “deliberate concealment of costs” could slash operating profits for the current year by euro 9M.

However, the good news was that the credit crunch had eliminated the threat of a hostile takeover from Iceland’s Bakkavör Group (Bakkavör recently sold its 10.9% shareholding in Greencore) or an Irish property developer.

With the elimination of these threats, Coveney will be able to concentrate on breaking into the US chilled food market.

The US chilled foods market is relatively under-developed and is behind Europe in both technology and hygiene. Earlier this year Greencore acquired Massachusetts firm Home Made Brand Foods and gained the backing of major brand, Weight Watchers, after signing a 10-year US licensing deal for five chilled prepared food categories.

Coveney commented: “We have made excellent early progress in our new North America convenience foods business - a strategy that will in time transform the scale, shape and returns of our group.”