Greencore Shares Down As It Warns On US Profit Growth

Bitten off more than it can chew? The group has flagged space capacity at US factories

Bitten off more than it can chew? The group has flagged space capacity at US factories

Greencore's $747.5 million (€606.8 million) purchase in December 2016 of Illinois-based Peacock Foods, which generates about $1 billion in annual sales, more than quadrupled the group's total U.S. sales.

Chief executive Coveney (pictured left) is to spend around half his time in the US, taking a direct role in the strategic, organisational and commercial leadership of Greencore US.

The group now anticipates adjusted EPS in the range of 14.7p-15.7p, lower than the current market expectations of 15.7p-16.6p.

The profit warning came alongside a hefty U.S. restructuring, in order to match the capacity the company has to its commercial pipeline.

In its trading statement today, Greencore said that fresh production at Rhode Island factory, which represented about 4% of its U.S. manufacturing footprint, will stop on March 25. While capacity utilisation has been low during the first half of its financial year, the company now believes that new business wins will increase the utilisation of this site.

The Rhode Island facility represents approximately 4% of the group's USA manufacturing footprint and 2% of its pro forma revenue in FY17. This follows an announcement from Greencore last August that it would repurpose the Jacksonville facility following the loss of a supply contract.

It added that it continued to make progress on its USA commercial pipeline, most particularly with its current large consumer packaged goods customers. "Any incremental capital and cash costs related to the delivery of this new business are not expected to be significant for the group". "The network and commercial developments announced in this update give the group confidence in improved financial performance through the second half of FY2018 and into FY2019", Greencore said.

Looking ahead, the firm said it continues to expect good organic revenue growth, and that its core business in the U.S. has continued to perform in line with expectations.

"The scale of such a charge would be determined by the prospective future use and value of these network assets", Greencore said.

Elsewhere, Chris Kirke, outgoing CEO of Greencore US is leading the Group to return to the UK.

Greencore added a crop of new recruits to its senior team, while chief operating officer of Greencore US, Chuck Metzger, now has day-to-day responsibility for the US business.