Greencore Says Impact of Brexit Likely to be “Modest” in Short-Term

27 Jul 2016 --- Greencore Group has said the UK's exit from the European Union is likely to have only a modest impact in the short-term and suggested that its UK business will largely escape the fall in the value of sterling.

The value of sterling has plummeted over 10 percent since the UK decided to exit the European Union on June 23, potentially impacting the cost of buying raw materials from overseas.

However, Greencore, which earlier this week purchased UK company The Sandwich Factory for £15m ($20m), pointed out that its UK business import less than a quarter of its ingredients and packaging materials.

The Irish food group said: “The EU referendum has resulted in greater uncertainty with regard to the UK economic outlook and the longer term implications remain unknown. At this stage, our assessment is that the short-term impact on Greencore is likely to be modest.”

“The Greencore UK businesses import less than a quarter of their ingredients and packaging materials. Given forward purchase arrangements, the depreciation in sterling is not expected to impact profit delivery in the current financial year.”

“However, if current exchange rates persist, net debt at year end will be higher than expected at the half year due to translation of US dollar denominated borrowings."

Its comments on Brexit came as Greencore disclosed a trading update for the 13 weeks to 24 June, with revenues up four percent to £360.4m ($472m).

Across convenience food, revenues were up 5.4 percent to £349.9m ($460m).

In the UK, Q3 revenue was up 5.7 percent year-on-year, driven by its Food to Go business, its pre-packed sandwich business, which has been helped by new product launches.

In the US, revenues were up 4.1 percent on the year in Q3, however they were one percent lower on a constant currency basis. This was down to the closing its Brockton site, in Massachusetts, and the phasing of shipments in frozen products.

Across its Ingredients and Property division, which makes up less than five percent of revenues, revenues came in at £10.5m ($14m) in Q3, down 28 percent.

The year on year decline in revenue was due to lower commodity prices and a decrease in demand from milk powder producers.

by John Reynolds