Greencore restarts production and sells molasses activities
Greencore has recommenced production at its Bow, Atherstone and Heathrow facilities and has extended production at its Northampton site as demand trends improved – in line with the general easing of lockdown across the UK.
The group also announced it had entered into a conditional agreement to sell its interests in its molasses trading businesses to United Molasses Marketing (Ireland) Limited and United Molasses Marketing Limited.
Like much of the industry, the group has experienced the dramatic and volatile impact the spread of coronavirus has had on its business.
The manufacturer reported a 34.1% decrease in sales in the third quarter of the 2019–2020 financial year, compared with the same period last year.
Food-to-go sales decline
Sales in April were the worst-hit (down 43%), but recovered slightly by July (down 23%). Food-to-go (F2G) took the brunt of the sales decrease, down 63% in April.
Darren Shirley, research analyst at Shore Capital, said he was not surprised that Greencore’s F2G activities had taken a hit. With lockdowns in place due to the outbreak of COVID-19, he was amazed that the manufacturer hadn’t been more adversely affected.
“F2G sales in the period are reported down 52.5%, which is a little better than feared given management had previously disclosed sales in the first six weeks of H2 2020 being down ‘up to 70%’ initially, slightly improving to ‘less than 60% below’ prior year levels on the exit,” said Shirley.
“While still strongly negative, we take encouragement from the promising trend through late Q3 and early Q4. Year-to-date sales across F2G are reported down 20% on a pro-forma basis. Within F2G we believe salads have outperformed sandwiches, with the Marks & Spencer-focused sushi activities closed for a period.”
Despite the struggles faced across the group’s F2G categories, Greencore reported a revenue increase of 2.2% (on a reported basis) for its other convenience food categories. In the nine months to the end of Q3, reported revenue increased by 1.4% to £373.7m.
Materially improving sales
“From a notably low base in deep lockdown, it is pleasing to see the materially improving sales trajectory and we are most encouraged by the July run-rate,” Shirley added.
“While so, there is more to do to reach a more substantial sales recovery, which makes the work on cost reduction, cash conservation and liquidity management so critical and, we should add, impressive by management since March.”
Due to the ongoing level of uncertainty surrounding the possible duration and impact of COVID-19 on the business, Greencore has continued to suspend its financial guidance for the full-year 2020.
Commenting on the results, chief executive Patrick Coveney added: “Our group has traded resiliently, with our deep customer relationships strengthened further, and we are encouraged to see a sustained improvement in demand and category mix.
“We remain confident in the relevance and attractiveness of the food-to-go channels and categories that we serve. In addition, we are well positioned for new business opportunities and a return to growth as the pandemic subsides.”
