Greenyard : announces results in line with earlier communications after a challenging first half year
11/20/2018 | 11:26am EDT
Greenyard announces results in line with earlier communications after a challenging first half year
Sint-Katelijne-Waver,Belgium,20 November 2018 - Greenyard (Euronext Brussels: GREEN)
Key financials - first half accounting year ending 30 September 2018
•Sales.Greenyard suffered from exceptional weather circumstances over the whole of Europe. A persistent drought affected the growth of vegetables and fruit, with a high impact on the availability of the product and/or on market prices. Combined with earlier announced and continuing margin pressure in a number of Greenyard's key markets, this resulted in a net sales decline by 3,6% to € 1.982,8m (excluding discontinued operations). Without taking into account the FX effect (-0,2%), net sales declined by 3,2% versus last year.
oFresh: net sales declined by 3,5% to € 1.647,9m, mainly due to loss of volumes from competitive pressure and pricing impact as a result of the weather conditions.
oLong Fresh: net sales declined by 4,1% to € 334,9m, primarily from the discontinuation of certain non-profitable contracts and delay of orders in Prepared, but also a temporary loss of sales due to the Listeria recall in Greenyard's Frozen division.
•REBITDA. In line with full year expectations as earlier communicated to the market, REBITDA for Greenyard fell with 39,9% to € 41,2m (excluding discontinued operations). The € 27,4m drop is mainly due to:
oFresh: REBITDA in Fresh fell by 49,0% to € 21,7m, given severe competitive pressure in Greenyard's key markets, causing inefficiencies, which was accelerated by the weather impact. Greenyard has taken measures to mitigate these factors, such as reorganisation of its footprint and organisational design. Greenyard expects a gradual improvement through a traditionally better second half year and stronger competitive position.
oLong Fresh: REBITDA in Long Fresh for the first half year amounts to € 20,5m, representing a 20,3% drop. This decline is due to the negative impact of the exceptional weather conditions, causing shortages and lower cost absorption in the factories and to a lesser extent, the consequences of the Listeria recall.
oGreenyard expects that its partnership strategy will bear fruit and will gradually improve profitability over the next few periods.
oListeria.Greenyard incurred a net non-recurring cost of € 22,6m and a recurring cost of € 3,5m related to the recall and destruction of frozen vegetables from its Hungarian facility and other related consequences thereof. The net non-recurring costs and related assets and liabilities are determined based on a conservative estimate of the costs and insurance income. Greenyard updates its
REGULATED INFORMATION - INSIDE INFORMATION - 20 NOVEMBER 2018, 17.45pm CET
estimations for the total costs and expected insurance proceeds to an amount of € 28,0m, which is less than the initially communicated € 30,0m.
oImpairment goodwill.Greenyard has decided to impair the goodwill of Greenyard as it was calculated at the time of completion of the business combination in 2015. This goodwill impairment amounts to € 29,2m for Long Fresh due to a potential delay in the expected profitability growth, caused by the recent events. The goodwill impairment does not affect the strategy, business or liquidity of Greenyard.
•The effective tax rate for the first half year amounts to -14,1%. The tax rate is driven by the reported loss and the use and reversal of deferred tax assets.
•The net result from continued operations amounts to a loss of € 68,1m. This result was negatively impacted by non-recurring items for a total amount of € -53,0m.
•Net financial debt.Net financial debt increased by € 98,3m to € 517,4m (including Horticulture), predominantly due to a lower profitability, non-recurring recall costs and the inventory build-up in the Long Fresh segment. This led to a leverage ratio of 4,4x end of September. Greenyard appreciates the full support it received from its relationship banks for the waiver on the covenant levels of September (2018) and March (2019). Greenyard is determined to structurally reduce the leverage over the coming periods. In order to strengthen its balance sheet, Greenyard has decided to act decisively by selling its Horticulture segment. Even after the sale of the Horticulture segment, Greenyard's focus remains on strengthening its balance sheet, now with strong emphasis on the improvement of its profitability and further internal growth.
oThe sale of the Horticulture segment to Straco will lead to total cash proceeds of € 120,0m. The proceeds of the sale of the Horticulture segment will be used to deleverage through the repayment of the € 150,0m retail bond that is due 5 July 2019, without affecting the existing credit facility or credit lines.
oAs the expected synergies with the Horticulture segment will no longer be realised within Greenyard, the sale entails an important goodwill impairment resulting from the valuation at fair value less cost to sell. The goodwill impairment does not affect the strategy, business or liquidity of Greenyard. Greenyard and Straco will examine how to further develop concepts for sustainably growing healthy and tasty vegetables and fruit, for a healthier future for all in the chain. Greenyard expects the closing of the transaction to occur before the end of this accounting year.
•Profit/loss for the period.A loss for the period from discontinued operations for an amount of € 44,9m results in a total loss for the period of € 113,0m.
•CAPEX spent (including discontinued operations) for the first half year amounted to € 40,2m, and includes € 15,1m of payments from investments executed at the end of last accounting year. CAPEX for this year was materially reduced.
•Greenyard now confidently looks towards the future with the current combination of the two segments: Fresh and Long Fresh. Greenyard has no further plans to sell any core activities. The announced measures for the optimisation of assets and the sale of non-core assets, as well as CAPEX savings and working capital optimisations are on track. In addition, Greenyard is deploying further strategic projects for a renewed focus of both segments, with a view to reinforcing the offer, improving net sales and margins and responding to the ever-changing demand of retailers and consumers. Greenyard will communicate more details as soon as more information is available.
•For AY 18/19, Greenyard maintains its guidance of REBITDA -25% versus last year, excluding currency impact.
•Interested parties are invited to listen to a live webcast by visiting the followinglink,or through the following dial-in: +32 2 342 07 47 (or toll-free number +32 800 11960), Passcode: 52454049#. The call will begin promptly at 6:30 p.m. (CET). An audio replay of the conference call will be available on Greenyard's Investor Relations webpage as of Wednesday 21 November.
Hein Deprez, CEO Greenyard:
"As communicated in August, the first half year of our accounting year 2018/2019 was challenging for Greenyard. Our results reflect the fierce competition and difficult market circumstances in our key markets. Consolidation in these markets puts pressure on all suppliers to find ways to deliver their products, even at low prices.
The current challenging market conditions have also led us to take certain decisive actions, such as the sale of our Horticulture segment, which was needed to strengthen our balance sheet again. We will use these proceeds to repay the retail bond that is due in July 2019. We continue to work hard to further strengthen our company and are fully focused on further internal growth.
Despite this hard market reality, we continue to believe in our strategy to form partnerships with our retailers by working closely and transparently together with them to rationalise the entire supply chain to the benefit of all: consumers, retailers, growers and Greenyard.
We already see good examples and stable growth for those retailers and Greenyard where we are able to build such partnership model. We will do that in the current combination of our Fresh and Long Fresh segments as a unique player in the market offering all categories in fruit and vegetables in all its forms: fresh, frozen and prepared. We are convinced we have the right people, heart, assets and strategy to defend our market position, grow our base and build these partnerships for the future."
* For NFD and leverage the figure reported is March 2018
Segment review1 - Fresh
Figure 2 - Sales & REBITDA evolution
H1 18/19 €'000 000
H1 17/18 €'000 000
Sales REBITDA REBITDA-margin %
1.647,9 21,7 1,3%
42,6 -49,0% 2,5%
Sales in Fresh declined with 3,5%. After FX correction of -0,1%, growth declined internally with a 3,2% drop.
Fresh felt competitive pressure in most of its core markets, particularly in Germany and Belgium. Sales decline was primarily due to exceptional weather conditions, a volume decline resulting from a combination of competitive pressure and shortages in certain Stock Keeping Units. Partnership model showing stable growth in all applicable markets.
REBITDA dropped by 49,0%, which represents a margin of 1,3% versus 2,5% last year (-120bps YoY). Key reason for the drop in REBITDA is the loss of volumes from competitive pressure, which entails loss of margin and increase in operational inefficiencies.
2 - Long Fresh
Figure 3 - Sales & REBITDA evolution
H1 18/19 €'000 000
H1 17/18 €'000 000
Sales REBITDA REBITDA-margin %
334,9 20,5 6,1%
25,7 -20,3% 7,4%
In Long Fresh, net sales declined with 4,1%. Foreign currencies impacted sales negatively by 0,6%, largely driven by the Brazilian Real and the GBP. As such, internal sales showed a -3,5% evolution.
This sales decrease is mainly driven by the lower volumes sold immediately after the Listeria recall in Frozen and a number of delays in export orders and orders from some larger customers in Prepared, as well as the termination of some non-profitable contracts in the UK, Germany and France.
The Frozen division suffered from the Listeria recall given the loss of margin caused by lost sales volumes, and a loss of fixed cost absorption, due to the temporary closing of production in Hungary. REBITDA in the Prepared division was affected by lower sales volumes and lower sales prices (mainly in mushrooms), but continued to stand its ground and even performed slightly better than last year.
Figure 4 -Non-recurring items from operating activities
Result on sale H-Pack & H-Fruit Result on sale of assetsNon-recurring income
Non-recurring items amounted to € 53,0m, compared to € 2,1m last year. The two main total non-recurring items consist of costs related to the Listeria recall (€ 22,6m) and the goodwill impairment for Long Fresh (€ 29,2m).
Net Finance Income/ (Costs)
Figure 5 - Net finance income / (costs)
Net finance income/cost (-)
Other finance result
Net finance costs witnessed a decline of € 3,2m YoY due to lower exchange gains/losses and bank and other finance expenses, not offset by slightly higher interest expenses.