Greencore crashes on expected slower United States profit growth

Lester Mason
March 15, 2018

Greencore's $747.5 million (€606.8 million) purchase in December 2016 of Illinois-based Peacock Foods, which generates about $1 billion in annual sales, more than quadrupled the group's total USA sales.

The company said chief executive Patrick Coveney would now spend half his time in the U.S. taking "a direct role in the strategic, organisational and commercial leadership" of operations there.

The group now anticipates adjusted EPS in the range of 14.7p-15.7p, lower than the current market expectations of 15.7p-16.6p.

Shares in Greencore Group PLC slid early on Tuesday as the company announced a restructuring of its U.S. network due to low capacity utilisation and said profit growth in the USA will be slower than expected. "Since then the group has been actively seeking to align the manufacturing network of approximately 2.5m square feet with current and prospective commercial opportunities".

The US changes include ending fresh production at the Rhode Island facility, although the site will be retained for potential repurposing.

Greencore said this decision will address the operating losses of the site that have continued into FY18.

Greencore employs approximately 15,000 people in 30 manufacturing facilities across the United Kingdom and the US.

Greencore said new business wins would increase volumes and site utilisation at its Jacksonville facility from the final quarter of 2018.

It is now restructuring the United States network to better reflect the commercial pipeline and try and tackle the capacity problem.

Investec's Nicola Mallard says commercial developments by the company should improve its financial performance from the six months to September into its 2019 financial year, but this is later than previously expected.

It added that, while the core United States business had performed as expected, a weak performance of the group's underutilised sites in the first half of the year would impact USA profit growth.

It said the one off cash costs of resetting the United States network and the management restructure are anticipated to be approximately GBP3m (US$4.1m). Chris Kirke, outgoing chief executive of Greencore US, is leaving the group to return to the UK.

Along with Patrick Coveney's increased involvement in the US - where he will now spend around half of his time - Chuck Metzger, COO of Greencore US, has assumed day-to-day responsibility for the US business and will report to Mr Coveney.

Other reports by Iphone Fresh

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