Greencore must focus on a convenient future

JUST before the start of the Greencore annual general meeting in Dublin last Thursday, Philip Kinnane, whose family farm backed onto the Thurles sugar factory, said he believed we had seen the last of beet growing here.

Kinnane’s family has been in the business for three generations, but that was his gut feeling as the AGM loomed and farmers protested outside Jury’s Doyle Hotel in Ballsbridge, Dublin.

In his view the end of an era in Irish agriculture was already at hand.

Even the placards revealed how farmer thinking has moved on.

They warned Greencore: “Get your hands off our cash.”

Both sides know the game was up.

Even if Greencore still want farmers to grow beet this year, the possibilities of getting enough throughput to justify another season is not a given.

At the AGM, Greencore chairman Ned Sullivan said no decision would be forthcoming until March.

By late Thursday night, Europe had made it clear that growing a beet crop this year was not a pre-requisite for farmers to get the full benefit of the €123 million compensation to be paid out over the next seven years.

It would be too simplistic to suggest however that the farmers have done with Greencore, and with the compensation issue centre stage, it is a fair assumption next year’s AGM will again be a hot affair.

Indeed, it could be said last week’s AGM saw chief executive David Dilger got a soft ride, given compensation is such a powerful issue, still to be resolved.

Each side is claiming ownership of the €145m earmarked for Greencore and farmers are quietly confident Agriculture Minister Mary Coughlan will see things their way.

No one knows. But there is more to Greencore than disgruntled farmers and sugar quotas. The challenge now is for the group to exploit the convenience foods division in Britain and the US.

The group hustled for long enough to find a suitable strategic food formula to enable it compete in the highly competitive consumer end of the food market.

Finally it looks to have achieved its ambition. Now it has to deliver to long-suffering shareholders.

Investors will be looking for tangible results within the next three years or the clock will start running down on the current executives and directors.

Mr Dilger was paid nearly €1m last year for making losses of close to €1m a week, the AGM was informed last week.

And in reality executives have been given a wide berth to deliver a food strategy that would start to make investors some money.

Chairman Ned Sullivan, who is the previous boss of Glanbia, was upbeat when he addressed the AGM.

Convenience foods now accounts for roughly two-thirds of group profits and performed strongly, with like-for-like profits up 16.4% to €67.7m.

In general the markets believe in what Greencore has achieved through its ambitious takeover of Hazelwood in Britain, a market leader in eight of the nine categories it serves.

Hazelwood was bought in 2001 and it has taken until now for Mr Dilger and his executives to whip Hazelwood into something like a winning formula.

Brokers are divided about future prospects. Dolmen Stockbrokers recently highlighted substantial write-offs for last year, adding the shares were fully valued relative to earnings potential.

But in the words of the division chairman, with convenience foods now accounting for 62% of operating profit, from 56% in 2004, “represents the future of Greencore.” Few would disagree.

Despite reservations, Greencore looks to be on a sustainable growth path.

If it isn’t, heads will roll.