Greencore bosses perplexed at sluggish stocks

GREENCORE Group will publish full-year results next week with no major surprises anticipated in the figures.

The announcement comes against a backdrop of an EU confession that its instruction to Ireland to exit sugar beet production, due to the high cost nature of the output, was wrong. Now the EU mandarins have put their hands up and said the demand for sugar beet was such that the output of Irish beet growers would make an important contribution in meeting rising demand.

The Government’s attempt to have Mallow, the only Irish sugar plant still in operation at the time, kept on as a going concern was rejected by the Commission and Irish Sugar, part of Greencore, was regrettably wound down.

It was Irish Sugar that formed the basis of Greencore initially.

Earlier this year the group sold its malting barley business, reducing the group to its core convenience food operations — mainly British-based with a small US operation it hopes will deliver substantial gains over the next five years.

After exiting the malting business Ned Sullivan, group chairman, told one angry shareholder at the AGM in March that while the malting business had generated a lot of money over the years, the company was selling out because it wanted to concentrate on its convenience foods operations.

For some time the group has pinned its hopes on convenience food, having been forced to abandon its property division since the collapse of that market.

That represented a big blow as the lands it owned around Carlow and Mallow in Co Cork looked to offer huge development potential at one point.

For certain it can be said the group has no distractions at this stage in its development.

It has been a difficult enough time for management, however, and the group is understood to be perplexed about the very poor rating of its shares by the market.

At the peak of the boom the shares hit a high of 560c. By lunchtime yesterday they traded down 1.85% to 106c on the previous day’s close.

Given its strong position in sandwiches, ambient sauces and a range of chilled and other goods a boost to the shares might seem a reasonable expectation.

While others in the business have seen major share price gains, Greencore management is left perplexed by the failure of the stock to grab the market.

It enjoys dominant positions in most of the categories it services in Britain, but the stock is not moving.

One of the difficulties seems to be that the own label sector it serves has a good few players and probably needs rationalisation.

One big flaw in the group seems to be that the sandwich end of the business accounts for a major part of turnover and profits and analysts do not see the business gaining much traction in other markets, most of which have their own take on what a lunchtime sandwich should involve.

In the US the group is gaining ground, but off a very small base and it is far from clear if it can gain the kind of traction required to make a real impact on its turnover and sales in the medium term without significant investment.

Reports in the market last week suggested a big think-in of top management took place a few weekends back, but nothing concrete has emerged from that.

Some analysts like the idea of a takeover by the Kerry Group, and have been suggesting this as a possibility.

But the Tralee-based group has its own very strong agenda and may have little interest in that idea, though one or two parts of the chilled foods business might be attractive to Kerry if they were for sale.

Some consolidation of the British market is needed, but it is far from clear if the dynamics exist to drive such reform.

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