Mixed results for Irish ingredients company

Greencore Group, the Irish food ingredients and convenience food company, this week reported a leap in operating profit together with strong sales growth and a reduction in net debt for the year ended 27 September 2002.

Sales from continuing operations increased by 23 per cent from €1,289 million to €1,586 million, with strong like-for-like sales growth in all four divisions of the group and overall like-for-like growth of 8 per cent.

Despite strong growth in the convenience food businesses, which now comprise the majority of the group's portfolio, the ingredients division felt the impact of the decline in profitability in Irish Sugar, with operating profit from continuing operations down 12 per cent to €38.4 million. Nonetheless, the malt and flour businesses both enjoyed strong profit growth with like-for-like sales growing by six per cent.

Greencore group​ chief executive David Dilger commented: "We are pleased with these results. The success of the disposal programme, although earnings dilutive in the short term, has sharply improved the strategic direction and focus of the group. In addition, the group's indebtedness has been substantially reduced as a result of the strong operating cashflow of the continuing operations and the proceeds from disposals.​

"We have made a solid start to the new financial year, a platform for continued growth into the future has been established and I confidently look forward to reporting future progress,"​ he added.

In January 2001 Greencore completed the acquisition of Hazelwood foods. At the time, David Dilger said: "As part of our strategy for the acquisition of Hazlewood we announced that we would be seeking cost savings, restructuring the combined businesses and eliminating certain loss-making activities.​

The restructuring of Hazlewood will assist our continuing drive for improved performance and reduce our costs."​

This week Greencore confirms that the integration of Hazlewood Foods is now complete. Dilger commented: "Profit from continuing operations has grown strongly, Hazlewood Foods has been fully integrated into the group and the total proceeds from the disposal programme have exceeded the announced target."​

According to Greencore, the acquisition of Hazlewood Foods provided the group with significant growth prospects but in order to take advantage of these improved prospects, a substantial disposal and restructuring programme was undertaken, the company said this week. During the last financial year, 11 further businesses were sold, as well as 50 per cent of the flour milling business, Odlums; in addition, three businesses were closed down. Disposal proceeds of €130 million were generated in the period, bringing total proceeds from the disposal programme to €230 million, this compared to an initial target of €190 million. In total, 22 businesses have now been sold and a further four closed down.

The company reported that Irish Sugar's profitability declined due to an increase in beet prices, the shutdown of the two factories during the related dispute with beet growers and significant cost inflation, most particularly in insurance. In the second half of the year, the company recovered some of these cost increases through a modest sugar price increase.

In the current financial year, Greencore is optimistic and reports that Irish Sugar will benefit from a full year impact of this price increase and the stability provided by the five year agreement entered into with the Irish Farmers Association, although there will be a further beet price increase of €0.50 per ton and a reduction in sugar quota of 7,052 tons, as recently announced by the EU. In addition, a four-year flexibility and change programme, which would substantially reduce manning levels and improve unit costs, is set to be introduced this year.

The malt division increased its profitability, as both malt production and deliveries reached record levels. Five of the division's 11 plants produced record volumes, including the two largest plants (Bury St Edmunds and Athy). In conjunction with strong cost management, the increased volumes had the effect of reducing overall unit costs for the year.

Moving to flour and oatmeal, Odlums enjoyed a very strong performance in the year. The closure of the mills of its principal domestic competitor in the early part of the year resulted in the business winning a number of new customers and producing to the full capacity of its mills.

It also benefited from a number of successful retail product launches, including flavour extensions to the successful quick bread range and a new fortified oatmeal product launched under the growing McCann's brand in the US.

Greencore gave just a brief mention to its edible oils company - Trilby Trading. According to Greencore, its importer and merchandiser of edible oils performed satisfactorily in the year.