Ireland: Greencore Group plc posted a decline in Malt performance, but a positive trajectory already in place for FY07

Greencore Group plc, one of Europe's leading convenience foods producers and the leading Malt producer in Ireland, UK and Belgium, announced on December 5th 2006 a strong performance for the year ended 29 September 2006. The company posted a decline in Malt performance, but a positive trajectory already in place for FY07.

Greencore Group plc commented in its press release on December 5th: “As anticipated, over-capacity in European malt markets and significant energy price inflation adversely impacted on the performance of our Malt business. We are, however, currently seeing a significant improvement in the malt cycle that commenced in the last quarter of FY06. During the year, we also significantly increased our focus on unlocking the value from the Group's property assets.”

“A recovery in the EU malt market should deliver a trading improvement in the Malt business and that, allied to the exciting property opportunities that we are pursuing, represents a positive outlook for Ingredients, Agribusiness and Related Property.”

The division delivered total operating profit (pre-tax) of Euro27.6m, consisting of continuing operating profits of Euro5.6m and discontinued operating profits of Euro22.0m. This represents a fall of Euro9.1m (24.7%) on FY05 levels, driven by upheavals in the EU sugar market both in anticipation of and following the introduction of the new EU sugar regime, and by a significant fall in profits at Malt, which absorbed energy cost increases of approximately Euro4m.

“Malt performance and restructuring

Malt experienced a very difficult year in FY06. International malt prices reached a low point in the cycle last winter driven, in large part, by industry over-capacity. That negative pricing impact, allied to energy cost increases of approximately Euro4m, had a negative impact on the profitability of the Group's malt business. Last year, we took the step of restructuring our portfolio of malting assets, resulting in the closure of three maltings. This year, we have restructured our core operations in the UK and Ireland, the net costs of which totalled Euro4.5m. The Malt business also benefited from a legal settlement receipt of Euro4.9m (net of costs). Both the restructuring costs and legal settlement have been treated as exceptional items.

The combination of a better balance between supply and demand, a weak barley harvest across Europe affecting malt prices and more stable energy prices has led to a recovery during the final quarter of FY06. This industry recovery, along with our strong operational capability, high quality malting assets and leading market positions (clear No.1 market share position in Ireland, UK and Belgium), should deliver a considerable trading improvement in FY07.”

Greencore has always been involved in developing and trading surplus property assets within the Ingredients and Agribusiness area. This continued in FY06 with the disposal of a property to a related party and the sale of a surplus property asset within the Malt business. Cumulatively, profits on the disposals of surplus properties were up modestly on those delivered in FY05.

Exceptional charges

The Group incurred exceptional charges (net of tax) of Euro67.1m in the period under review (full details of which are contained in Note 4 to the Preliminary Statement). This total charge comprises four separate areas, of which:
(ii) Malt Euro4.9m (net benefit) from legal settlement; Euro4.5m (net cost) from restructuring of UK and Irish operations.

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