Greencore to face farmers’ demands at AGM as analysts differ on future

SHAREHOLDERS gather in Dublin tomorrow for the annual general meeting of Greencore Plc at a time when the group is at a crossroads.

For the executive team, the loss of €20 million in operating profits is a blow, but it will finally rid the group of the long-running conflict with farmers about how much money it makes from sugar processing.

Farmers have indicated they will demand a big slice of the €145m compensation due to be paid to the group by the EU Commission for the loss of its sugar processing business.

That is the maximum compensation the EU says it is to be paid, and the Commission insists €10m has to go to the beet growers.

Farmers are to get €80m in compensation, but are demanding €160m overall and it looks like Greencore chief executive David Dilger will again be put though the wringer on that issue.

The group meets also as analysts stand divided over its prospects.

Dolmen Stockbrokers has withdrawn its buy recommendation on the stock.

It says recent gains fully value the group, given its limited earnings prospects for the next 12 to 18 months as margin and cost pressures mount.

Others, including NCB, rated the shares a buy, but the Dolmen view looks to have caught on.

Last week the shares traded down to €3.60 and by yesterday lunchtime they were down to €3.51 as investors continue to sell.

Early in January, at presentations to fund managers in the US, Mr Dilger raised the prospect of Greencore rolling out its convenience food formula in the US and elsewhere, which gave the shares a boost.

Greencore is also at the point where it has at last established a niche platform on which it can advance the business.

It was on that basis that British brokers Investec and NCB Stockbrokers in Dublin put a buy tag on the shares recently.

But Dolmen questioned the near-term outlook of the group given the cost and margin pressures surfacing in the British market.

It was also sceptical about the ongoing exceptional charges that have faced the group since its takeover of Hazlewood in Britain in 2001.

Exceptional costs of €123m last year more than offset potential gains of €40m from the sale of the Carlow sugar plant.

Since 2001 the shares have risen from €2.71 to €3.51, suggesting the markets still need convincing that Hazlewood holds the key to the future.

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