Greencore Net Falls as One-Time Gain Isn’t Repeated

Greencore Group Plc (GNC), which supplies more than 100 million ready meals a year to U.K. retailers, said annual profit fell 48 percent as a year-earlier compensation gain wasn’t repeated.

Net income fell to 53.4 million euros ($68.7 million), or 26.6 cents a share, in the year ended Sept. 26, from 102.9 million euros, or 51.8 cents, a year earlier, the Dublin-based company said today in a statement. Greencore had a one-time gain of 48.2 million euros last year mainly due to a European Union payment for exiting the sugar industry.

Greencore, which raised prices this year to recoup higher food costs, is now battling a slump in consumer spending as the Irish and U.K. economies shrink. The company, whose sandwiches, chilled meals and desserts are sold by U.K. supermarkets including Tesco Plc (TSCO), said convenience-foods sales dropped 4.2 percent as a result of the pound’s decline against the euro.

“The consumer environment in the near term is likely to remain challenging,” the company said in the statement. “In particular, in our core convenience foods market in the U.K. the general economic outlook is poor.”

Convenience sales overall in the early part of the current fiscal year are “in line with last year,” Greencore said.

‘Tough Environment’

Greencore fell 3.7 percent to 1.05 euros in Dublin, giving the company a market value of 212 million euros.

“We read this as short-hand for a difficult 2009 when consumer spending trends are likely to deteriorate,” analysts including Kevin McConnell at Bloxham Stockbrokers in Dublin said in a note. Next year “may be difficult with weak sterling and a tough environment.”

Overall revenue rose 3.2 percent to 1.3 billion euros in the 12 months ended Sept. 26, an increase of 13 percent after stripping out currency fluctuations. The euro has increased about 16 percent against the British pound this year, eroding the value of U.K. sales when translated back into euros. The U.K. accounts for around 80 percent of the company’s operating profit.

Greencore, formerly called Irish Sugar, shut its last sugar factory in 2006 to focus on convenience foods and ingredients. Sales at the ingredients and related property division rose 24 percent during the year, boosted by demand for malt.

Sales at the convenience-foods unit rose 7.4 percent to 894 million euros during the year at constant currencies. The company in July signed a 10-year contract to make chilled meals under the Weight Watchers label in the U.S. It aims to double sales in North America every year for the next five years, partly through acquisitions, said Chief Executive Officer Patrick Coveney.

Overall operating profit fell 4.5 percent to 77.3 million euros. Greencore said in June that a former manager at its mineral-water division deliberately hid costs. It said at the time that the current year’s operating profit would be 9 million euros less than forecast as a result.

The company plans to pay a final dividend of 8.21 pence per share, giving a total payout for the year of 13.51 cents, up 1.9 percent on the prior year.

To contact the reporter on this story: Louisa Nesbitt in Dublin at lnesbitt@bloomberg.net.

To contact the editor responsible for this story: Keith Campbell at k.campbell@bloomberg.net.

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