EU cuts to hit sugar giant
It is estimated, he said, that the current EU output of 17 million tonnes per annum could fall by up to 4.5 million tonnes.
How this will impact on Greencore remains to be seen, he said.
One broker estimates that the hit Greencore will take from price reductions could be as high as €20 million.
It is estimated the group makes about €24m profits from sugar annually.
While Mr Dilger would not comment on the figures, he said the changes in the regime would result in massive shutdowns, with companies and producers exiting the market over the next several years.
Mr Dilger was commenting on the reported changes that are due to be announced in June.
It is expected the changes will cut about 39% of the EU sugar support regime, which is significantly higher than the 33% originally projected.
Brokers Merrion Capital said in a note that the rumoured 39% cut in the support price for white sugar, if implemented, would cost the group €20m in lost profits every year.
Patrick Kennedy, Greencore’s outgoing financial director, suggested the Merrion figures were probably in the ballpark, but in the absence of concrete decisions were still only speculative.
Merrion said the €7m cost savings from the closure of Carlow and other capital savings would counter the loss in profits in any given year.
Mr Dilger said while the loss of Carlow was “regrettable”, it was necessary”.
Its closure will cost the group €65.4m, it was announced yesterday in conjunction with the publication of the group’s first half results.
All of the loss was taken in the first half, leaving the group with a pre-tax loss of €49.3m for the period.
Mr Dilger stressed Greencore did not want to be hoofed out of the sugar business as a result of the EU regime change coming down the track from 2006.
The changes should result in a “good balance between supply and demand” and it will ensure industry survivors.
“We want to be one of them,” he said.
