Investors may shy away from Greencore buy

WITH Kerry Group at a crossroads in strategic development investors may look elsewhere in the sector for some excitement.

If share price performance or profits earned is the gauge of where to put your money then investors may want to stay clear of Greencore, whose AGM will be held in Dublin today.

The group’s share price peaked at a high of 579c in 1998 when the markets were still booming.

Since then the share price has fallen steadily through to 2002 and reached a low of 239c.

Having dipped 10c yesterday the shares were trading somewhat better at 255c though well off the 2002 high they reached in 2002 of 330c.

The state of the group’s finances will also give nervous investors something further to worry about since the 700m purchase of Hazlewood in Britain.

That drove the balance sheet into dangerous territory and by the end of the current year the debt of €532m compares pretty badly against shareholders funds of €287m.

However, chief executive David Dilger made a major leap of faith on purchasing Hazelwood Foods.

To the sceptics this was a high-risk strategy especially since the Imperial Holly sugar venture in the US had previously cost the company dearly, involving a write-off involving about €70m.

Driven either by desperation or a keen sense of where food trends are heading Mr Dilger staked his all on

the purchase of Hazlewood.

It is a leading supplier of sandwiches, chilled pizza, speciality sauces and cakes in Britain. It is also the number two supplier of quiche in that market .

However, the cost of integration of Hazlewood has been high with write-offs totalling over €70m Dilger got rid of the non-core elements selling off more than 20 units within Hazlewood and delivering more than he promised in that regard.

While the group is now on a very different footing the big question is how soon can Greencore make another strategic move to ensure that it continues the recovery that Hazlewood promises over the next few years.

With Ned Sullivan coming on board as the new chairman his influence could be the steadying hand Dilger requires at this delicate stage of its development. Questions for the top table at today’s AGM:

1. What plans, if any, does the group have to build further on the Hazlewood acquisition?

2. Have the difficulties at Kears been resolved and if not what plans has the group to resolve the situation?

3. If fortunes do not improve will it consider selling the business?

4. Is it the case that margins in Irish Sugar have been cut from 18% to closer to 10% in the past two years?

5. Has the current high debt situation ruled out any further strategic moves into the food sector?

6. IAWS may hive off food activities from the agri-business side. Would Greencore see such a move as strategically desirable?