During the first six months of this year, Greenyard had to deal with some considerable blows: the warm and dry weather, a Listeria outbreak and continuing pressure on the market can be seen in results. Yesterday, the multinational presented their figures for the first six months of the fiscal year (ending on 30 September). Greenyard saw its turnover in both segments (Fresh and Long Fresh) decreasing. Their net result also ended in the red.
The exceptional weather circumstances throughout Europe during this period can be seen reflected in the sales figures of Greenyard. The dry weather that lasted throughout the summer months limited the supply of products and affected prices. Moreover, the pressures on the margins, which have been mentioned before, persisted on some of Greenyard’s most prominent markets. This results in a decrease in turnover of 3.6% to 1,982.8 million euro (excluding finished activities). Ignoring the exchange rate effect (-0.2%), turnover decreases by 3.6%.
“As announced in August, the first half of the 2018/19 fiscal year was challenging for Greenyard,” says CEO Hein Deprez. “Our results reflected the heavy competition and difficult market circumstances on our core markets. Consolidation on these markets puts pressure on all suppliers to sell their products, even for lower prices.”
The Fresh segment decreased by 3.5% to 1,647.9 million euro. This is mostly the result of a smaller volume due to pressure from competition and the price impact as a result of the weather. For Long Fresh, a decrease in turnover of 4.1% was reported, which means this result amounts to 334.9 million euro. This is the result of some loss-making contracts that were divested of and the temporary decrease in turnover due to the Listeria outbreak in the Hungarian factory. Production in the factory was halted and a recall followed.
One-off costs weigh heavily
The company’s REBITDA also decreased, as expected, by 40% to 41.2 million euro (excluding finished activities). The decrease of 27.4 million euro is the result of disappointing performances in Fresh and Long Fresh. For the first segment, the REBITDA decreased by 49% to 21.7 million euro. This is the result of the “heavy competition pressure on Greenyard’s core markets, which led to inefficiencies, further increased by weather circumstances.” The company says it has taken measures to absorb the impact of these factors somewhat. For the second half of the year, an improvement is expected. In Long Fresh, the REBITDA amounted to 20.5 million euro (-20.1%). According to Greenyard, the weather was the most important cause of this, although the Listeria outbreak also played its part.
One-off costs weigh heavily on the results. The Listeria outbreak cost the company 22.6 million euro, 3.5 million euro of which was directly connected to the recall of the frozen vegetables from the Hungarian factory. Total costs are estimated to amount to 28 million euro in the end, that’s less than the 30 million euro mentioned by the company earlier. Besides, a non-cash value depreciation was booked on goodwill of Long Fresh valued at 29.2 million euro. The net result of the continued activities amounts to a loss of 68.1 million euro, 53 million euro of which are one-off costs.
Increasing debt
The net debt increased by 98.3 million euro to 517.4 million euro (including Horticulture), which was mostly the result of low profitability, one-off costs and building stocks in Long Fresh. Late September, the company therefore passed the level of debt of 4.4x. “Greenyard is thankful for the support of its relationship banks for granting the waiver on the covenant levels of September (2018) and March (2019). Greenyard is determined to structurally lower its level of debt over the coming periods,” according to the press release.
The sale of Horticulture yields 120 million euro, which will be used to pay the debts. Hein Deprez: “The current challenging market conditions have prompted us to take decisive action, such as the sale of our Horticulture segment, which was necessary to restrengthen our balance sheet. We will use the yields of this to pay back the retail obligation that expires in July 2019. We’ll continue to work hard to strengthen our company, and we’re completely focused on a continued internal growth.”
Hein Deprez emphasises the positive expectations for the company: “Despite this tough market reality, we continue to believe in our strategy to form partnerships with our retailers by working closely and transparently together in order to rationalise the supply chain in everyone’s favour: consumers, retailers, growers and Greenyard. We’re already seeing good examples and stable growth with these retailers, as well as with Greenyard, so that we can work on a similar partnership model. We’ll do this in the current combination of our Fresh and Long Fresh segments as a unique player on the market that can offer all categories in fruit and vegetables in all of their shapes: fresh, frozen and processed. We’re convinced we have the right people, attitude, assets and strategy that allow us to defend our market position, grow our base, and work on these partnerships for the future.”