One of our best industries is under pressure
Just a week earlier, the food-to-property group revised its earnings forecast up 5% for the year, following good first-half results that got a shot in the arm from malting barley prices.
Ironically, the brokers said rising food prices, as well as the group’s exposure to property in Ireland, would hurt earnings.
It seems a bit harsh given the efforts management has made to give the business a strategic edge after fruitless years of effort trying to expand the group’s sugar operations overseas.
Effectively, Greencore has become a property player in Ireland with its main food activities now firmly rooted in Britain since it bought Hazlewood for €498m in 2000.
It sold out of anything to do with food in Ireland after it closed its two sugar plants in Mallow and Carlow.
In 2002 it sold off Erin Foods to The Campbell Soup Company in the US which wanted to extend its soups range outside America. Selling off the dried soups business was probably indicative of the group’s thinking.
Presumably it saw little long-term prospects in dried foods and probably felt it did not have the financial resources to take that product range to a new or different level.
Whatever the reasons, it hasn’t exactly been a terrific time for the Irish food and drinks sector.
Last week C&C’s shares were undermined by a critical analysis from another British broker who questioned its ability to crack the British market with Magners cider.
In another food category the Galtee range, now owned by Reox Holdings, and formerly part of Dairygold Co-op, looks like it is about to be sold.
Financial advisers have been appointed to the Irish wing of the food division that includes Galtee rashers, one of the leading best brands, as well as it’s well- known cheeses and other dairy products.
Overall, the Irish food sector, which seemed to offer such massive potential, looks to be struggling.
IAWS, so long the best- performing food stock on the globe, is also starting to feel the heat as the cost of flour will put price pressure on its core raw materials in the coming years.
It’s worrying at this stage in the economy’s development, that some of the groups, so strongly identified with the best in Irish food and drink, are starting to buckle.
Despite good interim figures that saw operating profits up 24%, Greencore has also been identified as vulnerable to rising food prices while the dip in the housing market raises questions about its major property plans for Carlow and Mallow.
It is likely to face cost pressures too, as well as being leaned on over prices by the big multiples in Britain, which is now the centre of operations of its consumer foods operations.
In the case of C&C, it looks to be in deep trouble.
Its difficulties are also in the British market where tied public house chains and head-on competition is making life extremely difficult for the drinks group whose market value has been cut in half in recent months.
While its brands are well regarded, C&C will haveto do something to define its products from their competitors.
Seasonality is still a big issue where fine weather has a serious bearing on the amount consumed.
All in all it has not been a good few weeks for one of our core manufacturing divisions, which accounted for more than €8 billion in exports last year. It is now seen as vulnerable to price and other pressures as the food and drinks sector moves to a significantly higher cost base.
