Inflation and UK slam slow growth at Irish food group Greencore

Irish convenience food maker Greencore has reported lower-than-expected volumes as cost pressures and industrial action bite in the UK.

In a trade update on Thursday, the UK-based manufacturer reported first-quarter sales rose 19 percent year-on-year to £463 million (€525 million). Pro forma revenue increased 18.9 percent.

Price increases drove the rise, with Food to Go revenue up 14.5 per cent year-on-year to £291.1 million, but volumes were slightly below last year’s first quarter.

Sushi and salads saw lower demand, while third-party product volumes fell about 10 percent compared to the first three months of last year.

Disruption from Covid hit early 2022, while this year rail strikes have impacted the group, it said in a statement.

Revenue in the other convenience category rose 27.6 per cent to £171.9 million, driven by inflationary effects and new ready meal customers.

Greencore said earnings conversion for the quarter fell short of management’s expectations due to lower volumes and costs.

“It’s a difficult, volatile market and business has started the year slower than planned,” said CEO Dalton Philips.

“In light of this, we are doubling down on our inflation recovery initiatives while driving harder and faster to bring our cost base to the right level.”

Labor and energy costs remain high, the statement said, despite the easing of raw material costs and packaging costs.

However, it said there would be a “delay” in recovering this cost from customers.

Full-year 2023 earnings are expected to come in “at the low end of market expectations” due to lower volumes, the impact of strikes and inflation, the trading statement said.

The group is now targeting annual recurring benefits of around £30m in 2024.

Mr Philips, who took over from former CEO Patrick Coveney four months ago, said he was “excited about Greencore’s longer-term future”.

“Strategically, we are well positioned for future growth given our customer base, the categories we serve, our operational capabilities and most importantly, the people behind it all. However, the immediate focus is on tackling the near-term self-help actions that will form the basis for margin recovery.”