Convenience food returns contribute 66% to Greencore’s first-half profits

GREENCORE said yesterday returns from its convenience foods made up 66% of its first-half operating profits.

At the pre-tax level the group said profits increased 8% to €32.6 million in the six months to March 25, 2005.

Further progress would be made despite challenging market conditions during the remainder of the year.

Since early 2001 Greencore, which dominates the Irish sugar market has been transforming itself from an ingredients and agri operation to one dominated by a range of convenience foods, sandwiches and ambient sauces. Back then convenience foods made up just 30% of operating profits.

Its main convenience market is in Britain where it enjoys number one or two position in each of its market segments. Last year it made 150 million sandwiches and is currently developing the quality end of the market where health and nutrition are key factors.

About 25% of its sandwiches make up market segment.

In the first half it earned pre-tax profits of €32.6 million with earnings per share, before exceptional items and goodwill amortisation, up 6% to 14.2c.

Results were more or less in line with market expectations, but the share price was impassive and rose just 1c to €3.25 on the day. Shares hit a low this year of €3 and a high of €3.45.

They have traded within a narrow range for several years.

Sugar operations were hit by falling demand, higher oil prices and an EU-wide oversupply of sugar.

In March, Greencore closed its Carlow factory arguing consolidation at Mallow was crucial to the survival of Irish sugar ahead of EU reforms.

Greencore’s convenience foods division had a strong first half, with operating profit up 23% to €30m offset by an almost equivalent fall in operating profit in the agribusiness unit.

Goodbody Stockbrokers said it did not expect to make material changes to its full-year EPS forecasts in the light of the results.

Chief executive David Dilger, commenting on the figures said tackling costs was “endemic” in the food division and would remain so.

As a result of its commitment the group moved its overall margin in the food division up from 5.7% to 6.6%.

The immediate target is to make 7%, said Mr Dilger.

Due to the more difficult trading conditions margins fell from 8.3% to 6.9% in ingredients and agribusiness giving an overall unchanged margin of 6.6% for the period.

An interim dividend of 5.05c has been declared, unchanged from the last interim.