Greencore to sell malt business

Food company Greencore is to sell its malt business to French cooperative Axéréal Union De Coopératives Agricoles in a deal worth up to €116.25 million.

The deal is expected to be completed by late next month. Greencore Malt comprises owned three malting businesses based in the United Kingdom, Ireland and Belgium, and also operates a consultancy arm, Global Malting Services.

Shareholders will have to approve the sale, which will see Greencore receive €112 million upon completion, a deferred cash consideration of €1.25 million on the first anniversary of completion and further cash consideration of up to €3 million depending on earnings performance.

However, the initial payment of €112 million will also be subject to a deduction for estimated net debt in the business of about €5 million, and a contribution of €5.6 million  to fund an estimated pension deficit relating to the Greencore Malt UK pension scheme.

In a statement today, the company said the sale would not include certain assets, including lands at Athy, Co Kildare, formerly held by Irish division Minch Malt. Greencore will also be entitled to retain insurance proceeds of €6.4 million received in the current financial year, relating to estimated reconstruction costs following an incident at Greencore Malt's malting facility at Ghlin, Belgium in 2008.

The group said it would use the proceeds of the sale to reduce its borrowings. The sale of Greencore Malt, which had gross assets of €144.7 million a at September 25th 2009, is expected to yield a profit of about €20 million.

Greencore said today its businesses had delivered a good performance overall in 2009 despite the challenging consumer environment, and said "firm foundations" had been laid for the future. Adjusted earnings per share for the group was 17.4 cent.

"The last 12 months has seen significant progress in the group with particular highlights being a more consistent and improved trading performance quarter on quarter, continuing momentum in the US, an executive and management team achieving real impact in the business and portfolio change consistent with the group's strategy. This positions the group very well for both the short and medium term," the group said in a statement.

Its convenience foods business had a strong start to the current financial year, the firm said, with most category businesses increasing both sales and operating profit year on year.

"It should, however, be noted that this comparison is against weak market conditions in the early part of our 2009 financial year," Greencore said.

Sales in the first quarter of fiscal year 2010 were €220.2 million, 6.5 per cent ahead of the first quarter of last year on a constant currency basis. Meanwhile, UK sales excluding water grew 7.8 per cent. In the US, the food-to-go and prepared meals categories rose 30 per cent in the quarter.

Greencore said exchange rates were having a less pronounced impact on year-on-year comparisons than the past two financial years.

The company remained cautious however.

"It is still early in the financial year and although encouraged by our recent trading performance we remain appropriately cautious about the consumer environment for the remainder of the year. Taking account of all of the above the Board is confident about the prospects for the Group in the year ahead and beyond," it said.