Greencore to get €100m from EU fund

GREENCORE will get just €100 million of the €146m earmarked for the industry through the EU’s compensation fund.

However the closure of Irish Sugar will be worth €200m to the group over time, due to the ending of the sugar beet regime in Ireland after nearly 100 years.

The sale of 300 acres in Carlow will be worth just €100m when clean-up costs are discounted.

Despite the projected shortfall in compensation, Merrion Stockbrokers have upgraded their stance on Greencore.

The shares are worth buying but they warn investors to be wary of the volatility of the convenience food sector which is Greencore’s main focus now that sugar is no longer part of its group structure.

Getting out of sugar has improved the visibility of the group going forward as 80% of turnover will be generated by its food businesses. They are mainly located in Britain where competition is fierce and the brokers warn Greencore is open to unexpected changes in consumer tastes.

Given the changed nature of the business, Greencore stands to achieve Earnings Per Share growth of about 8%-9% annually and the volatility factor may knock that growth pattern sideways from time to time, so the brokers have stopped short of putting a buy recommendation on the shares.

On the basis of current valuations the shares have a 15% upside to them which could see them rise to €4.41. The shares were down six cents to €3.94 yesterday.

On the compensation question the brokers note that approximately €310m is available for stakeholders in Irish sugar.

Greencore is not eligible for the majority of this compensation but will apply for restructuring aid, made up of the €146m and specifically aimed at compensation to the processor, for giving up the Irish sugar quota.

“In our valuation we estimate that Greencore will receive €100m but visibility on this issue remains low. In addition Greencore has 300 acres of land in Carlow which we estimate to be worth at least €100m, net of clean up costs,” said analyst Robert Brisbourne.