Greencore issues FY profits warning

Ireland-based food group Greencore issued a profits warning on Tuesday as it said full year earnings would be hit by its US operations.

The company said it expected adjusted EPS in the range of 14.7p-15.7p, with approximately two thirds of that contribution delivered in the second half. This contrasts with current market expectations of 15.7p-16.6p.

Greencore said the weak performance of the its underutilised original US sites in the first half of 2018, "combined with the timing of new business contributions and the current [sterling/dollar] exchange rate, will reduce the expected rate of US profit growth in 2018”.

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

In a trading update, Greencore said current fresh production its loss-making US Rhode Island facility would stop on March 25 and the facility retained for "potential repurposing".

The factory represented approximately 4% of the group's US manufacturing footprint and 2% of its pro forma revenue in 2017.

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

It added that it continued to make progress on its US commercial pipeline, most particularly with its current large consumer packaged goods customers.

"Plans are well advanced which, if successful, would secure significant new business at several sites in the Midwest region. The group anticipates that such new business would contribute revenue and earnings from the first half of full year 2019," Greencore said.

"The timing of these wins represents a delay versus previous expectations. Any incremental capital and cash costs related to the delivery of this new business are not expected to be significant for the group."

It added that it would incur £3m in one off cash costs "resetting the US network" and management structure and may take a non-cash, asset impairment charge on full year results for the network restructuring.

"The scale of such a charge would be determined by the prospective future use and value of these network assets," Greencore said.