Can our food sector rescue the stock market?
It is getting increasingly difficult to stay upbeat, even about some of the food groups that also got caught up in the property boom.
The stark example on that front is Greencore, whose extensive land banks in Carlow and Mallow, which became available after the closure of the two sugar plants, raised expectations of more huge investment gains from the proposed property developments in those towns.
The group’s land windfall inspired property developer Liam Carroll to buy 26% of the company for more than €170 million some years ago. His raid on the group led to speculation he would buy the group, sell the food division and develop the property side of the business independently.
The intervention of Carroll has hung over the group for a number of years. His 26% holding has caused uncertainty for Greencore’s young executive team trying to elevate the former sugar company into a dynamic consumer food group serving the top retail multiples and other stores in the British market with its range of sauces, chilled foods and mineral water.
The Carroll presence might be resolved, however, if the difficulties in property force him to liquidate some of his assets to meet the loss of cash flow the market downturn in the sector has caused. Even if for no other reason, the state of the property market looks to have rendered his purchase of Greencore shares pretty redundant at this stage, and his exodus would remove one of the uncertainties hanging over the group.
Origin Enterprises, floated off from IAWS, has a property presence in the Cork South Docklands but is not encumbered by a hostile investor.
Its prime property includes a two-acre gateway site for which it has submitted a planning application for mixed development.
From an Origin perspective this is a long-term project linked to a big development of the docklands site in Cork harbour, which is under the control of Cork City Council.
That, in time, will deliver for Origin, as it continues to develop its provender and flour milling operations, as well as its recently acquired Masstock business, a leading provider of farming advice and systems to international markets for many years.
In its last financial year, the group also acquired the 50% of Odlum from Greencore, a move that will also speed up the consolidation of the flour business closer to its core Dublin market.
Timing can be key in business decisions and there is little doubt that in setting up Origin, IAWS — now Aryzta since it merged with Swiss Group Hiestand — made a critical decision. As part of IAWS, the Origin operations were overshadowed by the convenience food operations, inspired by the Cuisine de France par-baked goods division.
As a result, the R&H Hall animal feed business, Odlums flour and the Gouldings fertiliser operations were in effect neglected somewhat. But the results for the last financial year, showing revenue up 69% to more than €1.5 billion and operating profits ahead 86% to €70.9m, show how the hiving off of those businesses has opened up new opportunities.
The group has also taken a 20% interest in Continental Farmers Group, giving it a direct stake in arable farming in eastern Europe.
Origin has a momentum Greencore has lost — a pity, given the huge potential our broadly based food sector continues to deliver in difficult times. Kerry Group and Glanbia are examples of what this sector can do, and Origin is starting to show it can also deliver, even if the terrain in which it operates is less consumer driven.
