Shares of international food-to-go supplier Greencore have slumped by almost 30% today after it issued a profits warning on headwinds in its struggling US business.

 

Combined with the lack of new business, plus the impact of the exchange rate between the pound and the dollar, profit growth is likely to be reduced throughout this year, Greencore stated.

The group had previously noted the underutilization of its sites, but announced in November 2017 they would all remain open and seek to win new business.

Greencore has taken stronger action today by calling time on its Rhode Island site, which continued to make losses, although this only accounts for 2% of the group’s revenue for the whole of last year.

All new business will now be directed to its sites in Jacksonville and Minneapolis.

 

Chuck Metzger , COO of Greencore US, has assumed day-to-day responsibility for the US business and will report to Patrick. Chris Kirke , outgoing CEO of Greencore US, is leaving the Group to return to the UK and will continue to work with the leadership team to ensure a smooth transition.

 

Investment bank Jefferies has outlined that the Rhode Island closure is the main part of the rationalising process for Greencore’s manufacturing base.

It argued that Greencore’s Jacksonville plant has suffered badly from the loss of a key customer last year. Jefferies also said that the Minneapolis plant will benefit from the acquisition of Peacock foods, which went through in December 2016, as it is now seeing a higher rate of utilisation.

In the UK, there is expected to be lower volume growth in the second quarter this year, mainly due to the poor weather, as the retail industry took a hit with the adverse weather caused by the “Beast from the East”.

More positively, Greencore anticipates good organic revenue growth, but only a slender improvement in operating leverage for the financial year this year.

Broker Peel Hunt downgraded the stock to hold, adding: “Having promised significant new business wins, the company has now recognised that these will be slower than hoped and that it needs to address under-utilised plants in the US.

“Management credibility is clearly damaged and we do not have confidence re the scale, timing and impact of new business wins to have a positive recommendation.”

The shares have fallen 29.8% today to just 128.2p . The shares have more than halved since hitting 263p in March 2017.

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