Nestlé and R&R agree to merge ice cream and frozen food businesses

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Nestlé and R&R have agreed to merge their ice cream and frozen food businesses to create a new group to be called Froneri.

The ice cream and frozen food joint venture will have sales of about CHF 2.7 billion in more than 20 countries and employ about 15,000 staff.

Froneri will be headquartered in the UK and will operate primarily in Europe, the Middle East (excluding Israel), Argentina, Australia, Brazil, the Philippines and South Africa.

The new company will combine Nestlé and R&R’s ice cream activities in the relevant countries and will include Nestlé’s European frozen food business – apart from pizza and retail frozen food in Italy) – as well as its chilled dairy business in the Philippines.

Nestlé revealed in October last year that it was in advanced talks to join forces with the private label ice cream manufacturer R&R.

“This is an exciting growth opportunity in a dynamic category,” Nestlé CEO Paul Bulcke said. “Froneri will capitalise on complementary strengths and innovation expertise, combining Nestlé’s strong and successful brands and experience in ‘out-of-home’ distribution with R&R’s competitive manufacturing model and significant presence in retail.”

R&R Ice Cream CEO Ibrahim Najafi, who will also be CEO of Froneri, added: “I am thrilled about the potential of Froneri and the opportunity for R&R to combine with the biggest and best food business in the world. R&R has gone from strength to strength in the last few years and the blend of people from the two organisations will create a leading team, ideally suited to drive future growth.”

Luis Cantarell, Nestlé executive vice president for Europe, Middle East and North Africa, will chair Froneri’s board of directors. Three senior Nestlé executives and three senior executives appointed by private equity firm PAI Partners, R&R’s owner, will also sit on the board.

Nestlé and PAI will have equal equity interests in the joint venture. The transaction is subject to employee consultations and the approval of regulatory authorities. Financial details are not being disclosed.

Frédéric Stévenin, partner at PAI Partners, said: “Froneri, through the combination of Nestlé’s and R&R’s expertise, and the backing of PAI Partners, is a unique and exciting opportunity for further strong growth. We look forward to further leveraging our industrial approach to ownership and strong consumer expertise to support R&R in this new venture.”

Morning update

It is a very busy morning on the stock exchange and elsewhere this morning with results and deals to report.

Private equity firm LDC has invested more than £8m in the management buyout of healthy food-to-go retailer Vital Ingredient to support the roll-out of the group in London and throughout the UK. Santander will provide a further £4m of funding to support the expansion. Founder Alex Heynes opened the first store in London’s West End 15 years ago and the business now operates 17 sites in the capital. Employing over 200 staff, Vital Ingredient has more than doubled turnover in the last three years to more than £12m thanks to increasing demand for healthy grab-and-go meals. The deal will enable the business to continue growing its London presence and support expansion into new cities across the UK. LDC is backing management to more than double the estate within the next three years to at least 35 stores. It will also be introducing new store formats and exploring new brand partnerships as part of its growth strategy.

Value butchery chain Crawshaw Group (CRAW) has reported record sales thanks to its rapid store expansion strategy. Turnover in the year to 31 January grew 51% to £37.1m and like-for-like sales slowed to 1.8%, compared with 5% growth 12 months ago. However, the group fall to a £300,000 pre-tax loss, from a profit of £1.2m, as it invested in opening 17 new shops and acquired Gabbotts Farm. Crawshaw expects to open another 15 sites this year, including further expansion into Yorkshire/North West heartlands and entering Midlands/Birmingham area.

CEO Noel Collett said: “We are pleased to report another set of solid results for the business and are delighted with the significant progress we’ve made during a very transformative year. We have proved that customers love our compelling retail concept, delivering quality fresh meat and food-to-go at exceptional prices. With strong foundations now in place, we are well positioned to build on our current position and establish Crawshaws as a national brand.”

Sales at Home Retail Group (HOME) fell 1% to £5.67bn in the year to 27 February, with Argos delivering a flat performance of £4.1bn and Homebase declining 3% to £1.4bn. During the year, the group completed the sale of Homebase for £340m to Westfarmers and agreed a takeover deal with Sainsbury’s. Benchmark profit before tax at Home Retail decreased by 28% to £94.7m and the recommended offer from Sainsbury’s resulted in an exceptional goodwill impairment charge of £852m, leading to a total loss after tax of £808m.

CEO John Walden said it had been a “landmark period” for the group. “During the year we continued to progress the Argos Transformation Plan, including the introduction of Fast Track, which offer market-leading propositions for both same-day home delivery and store collection. We have been encouraged by the customer response to Fast Track with our on-time delivery rates and customer satisfaction having continued to improve to leading levels. Argos also now has a proven digital store model, including small formats and concessions, which require lower capital outlay and provide customers with fast access to an expanded product range regardless of store stock capacity.”

Soft drink business Nichols (NICL) said its trading performance in the year to date was in line with management expectations. The Vimto owner added ahead of today’s AGM that the UK grocery market remained challenging but its revenues had been boosted by the acquisition of the remaining stake in The Noisy Drinks Company in January and the Feel Good brad in July last year.

The group has responded to the Chancellors proposed sugar levy by launching a Vimto Remix drink with no-added sugar and is preparing for the relaunch ahead of summer of the Feel Good brand, a range of premium adult juice drinks which have no added sugar and contain 100% natural ingredients.

Non-executive chairman John Nichols said: “At this relatively early stage of the year, we are pleased with our performance to date and expect to deliver full year earnings in line with market expectations.”

Kerry Group (KYGA) increased revenues in the first quarter as it improved volumes despite challenging market conditions. Reported revenues increased by 0.9% in the period as volumes grew 2.9% but was offset by net pricing being 1.5% lower in line with lower input pricing and currency headwinds of 2.3%. The group trading profit margin increased by 50 basis points, reflecting a 40 basis points improvement in taste and nutrition division and a 20 basis points improvement in Kerry Foods.

Irish nutrition group Glanbia (GLB) has reiterated its 2016 guidance of 8%-10% growth in adjusted earnings per share after a “good” first quarter performance. Ahead of an AGM later today, the group said wholly owned revenue in the three months to 2 April declined 0.8% on a reported basis and 1.9% on a constant currency basis when compared to the same period in 2015. The fall came as prices declined 5.8% as a result of the volatile dairy market. Volume growth of 0.5% and a 3.4% contribution from acquisitions partly offset the falls. Total group revenue, including joint ventures and associates, declined 2.5% on a reported basis and 3.3% on a constant currency basis.

MD Siobhán Talbot said: “Glanbia delivered a good performance in the first three months of 2016. Our growth platforms of Glanbia Performance Nutrition and Global Ingredients delivered volume growth in the first quarter. Our on-going strategy of building a business to deliver better nutrition via consumer brands and high-quality ingredients has mitigated the impact of weak dairy markets.”

DS Smith has continued to report good volume growth across the business, it said in a pre-close trading statement. The supplier of recycled packaging for consumer goods businesses added growth from its large pan-European customers had been particularly strong, and was also driven by its fast-growing e-commerce channel. DS Smith invested around €600m in acquisitions in the financial year, which it said were performing fully in line with expectations. CEO Miles Roberts said: “Packaging, and the supply chain in which it plays a part, is of great importance to our customers as they adapt for the evolving multi-channel retail environment. Over the year we have grown organically and by acquisition while at the same time improving our margin, and we remain excited about the opportunities for the business.”

Crawshaw shares are booming this morning after another record year and are trading 5% up to 83.4p. Home Retail shares were down 0.4% to 169.5p. Shares in Nichols have fallen 1.1% to 1,320p on the back of the trading update, as have Kerry Group, down 3.4% to €78.07 and Glanbia’s, down 1.7% to €17.25.

Yesterday in the City

Shares in SABMiller (SAB) slipped 0.5% to 4,196p after its fourth largest shareholder Kulczyk Investments sold half its 3% stake for £1bn for £41.80 a share.

Real Good Foods (RGD) share price increased 3.7% to 42p after the group said in a pre-close trading update that full-year profits would be boosted by the sale of the Napier Brown sugar business.

PZ Cussons (PZC), which announced non-executive chairman since 2010 Richard Harvey is retiring at the end of the year, finished the day up 1.5% at 328.2p.

Poundland (PLND) continued to make gains and ended the day up another 0.4% to 186.5p.

There was more fallers than risers, with Greggs (GRG) down 3.2% to 1,040p after strong gains on Monday. The supermarkets fell again, with Tesco (TSCO) down 0.7% to 183.4p, Sainsbury’s (SBRY) down 0.5% to 288.3p and Morrisons (MRW) down 0.4% to 189.9p. British American Tobacco (BAT) also fell 0.4% to 4,144.5p after it warned in a Q1 update that profits would be hit in the second half by currency headwinds.