Good and bad news for Ireland’s food sector

IN A mixed year for the Irish food sector there were standout moments, some good and some bad.

Greencore having exited the sugar business turned its attention to property development and has unveiled a €1.1 billion development package for Carlow town centre.

It has major plans too to develop the old Mallow site while still keeping the development of its broad range of convenience foods, sold mainly in Britain, through its Hazlewood acquisition.

Greencore’s exit from sugar processing has in fact given the impetus to the group to develop a strong property wing that will be self-financing.

If Greencore delivers on this programme the development model promises to create 2,000 jobs in the Carlow area.

Greencore exited the sugar industry following the ending of a European Union protection system for the industry.

Sugar was a highly profitable wing of the group’s business and generated earnings of over €20m a year for the group as it struggled to redefine itself as an international player.

So far the group has managed to whip the Hazlewood Group into shape, but the continuing pressure on margins in British retail have to be a concern.

Without the huge benefits of its sugar earnings, through its virtual monopoly in the Irish market, Greencore, is entering a more transparent phase, when its ability to deliver long term in the cut throat convenience food sector will be tested.

Brokers are still soft on the stock and believe the group still has to prove itself.

In that context the property wing of the business is a bit of a side show.

Greencore is involved in one of the most difficult end of the food market where reinvention is a constant challenge.

Fortunately for the group it has the number one of two slots in the market segments it delivers to, but after years of trying to redefine itself the group still has to put together a string of results that will reward long suffering investors.

Liam Carroll’s acquisition of a 22% stake in the business earlier this year makes the group one to watch in the year ahead.

Just to keep the pot boiling Carroll has given no indication as to his intentions for his investment which cost him over €170m to acquire from financier Dermot Desmond.

IAWS Plc the convenience food group has seen its share price double since Owen Killian took over as chief executive from Philip Lynch, and the outlook remains positive with food analysts sill tipping the shares as a Buy in the year ahead.

Glanbia which has started to flex muscles is making significant strides in the nutritional side of its business where earnings from that sector could be as much as 20% within three years.

This Glanbia story has been building slowly for some time and, like Greencore, it needs to put together a series of good results, minus any write-offs, to assure investors that after years also of redefining and rationalisation, the Kilkenny based group is finally on a definite growth path.

Finally last week ABN Amro had a right cut at Kerry Group, saying it needed to impress the markets with a substantial acquisition.

The report, which Kerry accused of miscalculating the rationalisation costs, has some interesting observations to make overall.

It is noteworthy also that in its latest review of company stocks for next year Goodbody’s food analyst, Liam Igoe, failed to give the group, a Buy recommendation.

The ABN report warned the weakening US dollar, slower organic growth, input cost pressures and the absence of a sizeable acquisition, suggest the risks for Kerry were firmly on the downside.