Ghent, Belgium-headquartered Greenyard Foods, a major producer of frozen and canned vegetable products, has achieved sales growth of +0.7% to €297.6 million for the half-year ending on September 30, 2014. Among operational highlights it has reported for the period are:
- Τhe harvest season is currently ahead of plan due to an early start and a soft autumn. The total harvest season for 2014 will be finally evaluated at the end of December.
- Continuation of efficiency improvements and international integration of processes within the frozen division (Pinguin).
- Acquisition of the production facility at King’s Lynn in the United Kingdom. Hence the execution of the strategic plan to acquire all production facilities has been finalized.
Financial Highlights
Consolidated REBITDA increased by €15.0 million to €39.0 million due to the improvement of commercial and operational results (+€10.3 million) and the termination of rents (+€4.7 million).
Margins increased from 8.1% to 13.1%, while working capital rose by €3.6 million despite an increase of inventory value of €61.1 million. The net result of €14.3 million, or +€17.6 million, yielded an equity increase of €226.5 million.
‘We have achieved an exceptional result in the first half year, with a strong increase in REBITDA and margins,” said Marleen Vaesen, chief executive officer of Greenyard Foods. “These operating results were mainly realized by a continuous focus on efficiency improvements and portfolio mix. Higher production volumes also have a positive impact on the results.”
She continued: “This good result confirms our strategy, and we continue to focus on our four strategic priorities: focus on customer and consumer, operational excellence, cash flow improvements and investing in the organization.”
Stable consolidated sales compared to the first half of the previous year (+0.7%) are the combined effect of a slight decrease of -1.9% in the frozen division, and an increase of 5.3% in the canning division. Exchange rate evolutions had a positive effect consolidated sales of +0.8%.
Operating Result
Consolidated REBITDA increased by €15.0 million compared to the previous accounting year. Of this increase, €10.3 million was due to the commercial and operational results in both divisions following better operational efficiencies and a larger focus on portfolio mix. In addition, seasonality of operations led to large production volumes in the first half of the year, with a positive impact on the results. The ceasing of the rent of production facilities following their acquisition had an impact of €4.7 million on the REBITDA over this half year.
The consolidated REBIT increased by €10.4 million compared to the previous accounting year. This increase can be explained almost entirely by commercial and operational results both in the frozen and canning divisions.
The consolidated non-recurring charges amount to €0.3 million, whereas the consolidated results for the same period during the previous year include net non-recurring income of €62.7 million. This mainly consists of the €65.5 million gain realized on the sale of the potato division.
Financial Result
The consolidated net financial result over the first half of the year improved by €4.5 million from € -8.8 million to € -4.3 million. This can be chiefly explained by the positive exchange results (mainly on GBP) of €3.6 million. The financial result for the prior year included non-recurring charges of € -2.1 million, previously capitalized costs that were taken into charges at the repayment of the club deal financing.
The half year results as per September 30, 2014, include a negative result on derivatives at fair value of € -0.4 million (September 30, 2013: € -0.3 million). Following the application of hedge accounting, as from current accounting year onwards this result is no longer included in the financial result but in the overview of comprehensive income.
The consolidated tax cost over the first half of the year amounted to € -4.2 million, or a tax rate of 22.7%. This consists of € -3.9 million income taxes and € -0.3 million deferred taxes without cash impact. The tax rate of 22.7% is caused by the profits that were realized in companies with tax losses carried forward, for which no deferred tax assets were accounted for. These have a positive effect on the consolidated tax rate as of September 30.
The earnings per share of the first half year AY 13/14 from discontinued operations include entirely the earnings per share realized on the sale of the potato division.
The increase of the tangible fixed assets by €19.0 million can be explained by the impact of the acquired production facility at King’s Lynn in the UK in July of 2014 (€ +17.4 million) and the other investments of the accounting period (€ +14.2 million). This increase is partially compensated by depreciation charges (€ -14.2 million) and the remaining combined impact of transfers, capital grants, disposals and positive foreign exchange rate fluctuations (€+1.6 million).
Inventories increased by €61.1 million compared to March 31, 2014, of which €56.6 million worth was in the frozen division and €4.4 million in the canning division. The seasonal character of the activities has a considerable impact on the inventories of the Group, as large volumes are produced during the harvest period in the first half of the accounting year. The seasonality is more limited in the canning division due to the convenience activities and the larger production of winter vegetables during the second half of the year.
Consolidated trade debts increased as well by €57.2 million. These are directly related to the increased inventories, which results in the net impact on the working capital being rather limited.
Equity (including non-controlling interests) amounts to €226.5 million, or 32.9% of the statement of financial position total as per September 30. This increased by €14.6 million, which is mainly due to the realized net results over the first half of the year.
Outstanding financial debts increased by €14.3 million compared to the end of March 2014 due to withdrawals of working capital of €13.8 million. This is because of the seasonal character of the operations.
Frozen Sales 63% of Total
The frozen vegetable products division (Pinguin) accounts for 63% of the Group’s consolidated sales. Its sales decreased 1.9% is the combined effect of a volume decrease, a positive portfolio mix effect and a positive exchange rate effect. Sales were impacted during two months by the embargo from Russia, which became effective in August of 2014. Russia represented 2.2% of the sales of the frozen division during the first half of the year.
The REBITDA increase by €10.8 million is explained for €7.6 million attributed by the commercial and operational results. These consist of efficiency improvements and focus on portfolio mix. In addition, slightly higher production volumes have been realized with a positive effect on the results, which is also due to the early crops. The ceasing of the rent of production facilities had an impact of €3.2 million on the REBITDA compared to the first half of previous year
The increase of the REBIT by €7.7 million can almost entirely be explained by the commercial and operational results of the division.
Canned Sales Up 5.3%
The canned products division (Noliko) accounts for 37.0% of the Group’s consolidated sales. Sales increased by +5.3% compared to previous accounting year.
The REBITDA increased by €4.0 million, of which €2.5 million was mainly caused by commercial results and to a lesser extent by operational efficiencies and the impact of higher production volumes. The ceasing of the rent following the acquisition of the production facilities has an impact on the REBITDA of €1.5 million.
The increase of the REBIT by €2.7 million can almost entirely be explained by the commercial and operational results of the division.
During the first half of the accounting year 2014-15 there was a free cash flow of €1.9 million. The operational cash flows that were realized are higher than the investments, including the acquisition of the production site in King’s Lynn in UK.
Post-Balance Sheet Events
Between September 30 and the date that data for this story was released for publication, assets in Manschnow, Germany, were sold to KTG Agrar Group. However the gain that was realized on this sale has no significant impact on the consolidated results.
Looking Ahead
After a high performance during the first half of the year, Greenyard Foods’ board of directors and management believe that the foundations are present for further profitable growth. However, due to the seasonality and the price pressure, the advance of the first half-year cannot be fully preserved.
