Sandwich maker Greencore warns on profits as USA business runs into trouble

Sandwich maker Greencore warns on profits as USA business runs into trouble

At the end of 2016, Greencore announced a $747.5m takeover of USA firm Peacock Foods, saying that would "add significant scale" to its operations.

The business also said share earnings would be below market expectations, prompting a sharp drop in Greencore's share price.

Patrick Coveney, the chief executive of convenience foods group Greencore, is to spend "approximately half his time" in the USA, as part of a shakeup of the company's leadership team.

Adjusted earnings per share are now expected to be between 14.7p and 15.7p in 2018, down from a range of 15.7p to 16.6p.

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

Since then the group has been actively seeking to align the manufacturing network with current and prospective commercial opportunities.

In its trading statement today, Greencore said that fresh production at Rhode Island factory, which represented about 4% of its USA manufacturing footprint, will stop on March 25.

Greencore said it is making good progress on its US commercial pipeline, and could secure earnings-enhancing new business across several sites in the US Midwest, which would be booked in the first half of its year ending September 2019.

However, it is now restructuring its network as a result of continued low capacity utilisation. This follows an announcement from Greencore last August that it would repurpose the Jacksonville facility following the loss of a supply contract.

Greencore employs approximately 15,000 people in 30 manufacturing facilities across the United Kingdom and the US. The timing of these wins represents a delay versus previous expectations.

"However, the weak performance of the group's underutilised original sites in the first half of FY2018, combined with the timing of new business contributions, and the current GBP/USD exchange rate, will reduce the expected rate of US profit growth in FY2018".

It added that it would incur £3m in one off cash costs "resetting the USA network" and management structure and may take a non-cash, asset impairment charge on full year results for the network restructuring.

Chuck Metzger, chief operating officer of Greencore US, has assumed day-to-day responsibility of the US business will report directly to Mr Coveney.

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

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