It has now significantly cut its profit projection for the full year.
The multinational did not provide details of its profits but noted that total sales for the quarter period were 1.5% lower at €1.01 billion.
Sales in its main business segment, fresh produce, were down 2.4% at €884.7 million. The company said: “The solid sales increase in the Bakker operations, the Netherlands and France could not offset the decline in sales in Germany, Belgium and Poland.”
Frozen sales were down 2.1% at €174.7 million. Greenyard said frozen activities “realized solid growth despite the exceptional warm weather, but this was offset by underperforming sales in Prepared activities due to the termination of some unprofitable contracts and the ramp-up and delivery of new contracts.”
The company explained that while overall volume demand remained stable year-on-year, several factors hit its profitability, including the recent recall of frozen products linked to a Listeria outbreak.
It estimated recall and related costs will cost the company €30 million, after insurance.
In addition, it said the “exceptional warm and dry summer period triggers irregularities in harvesting which results in fluctuations in volumes and prices of commodities,” which impacted its fresh and frozen segments. In the frozen sector, potential shortages between 30 and 50% are expected.
Greenyard also said it experienced “continued challenging pricing competition” in its fresh markets.
It now implementing “future proof operating models and distribution footprint” in Germany and Belgium, but said these would only yield results over the medium term.
Profit forecast cut
The company is now forecasting a 25% drop for the 2018-19 financial year, compared to a prediction of a 10% rise on May 2.
One important plan to increase profitability relates to efforts to mitigate the effects of the recall. It said that all the tests in its Hungarian facility found no presence of Listeria monocytogenes.
This opens the way for a re-start of this facility “on short-term”, it said.
“Despite only a slight decrease in sales, this quarter was marked by longer than expected pricing pressure and competition in our markets, unforeseen factors such as the recall for the potential Listeria contamination and the exceptional weather circumstances,” said CEO Hein Deprez.
“Based on new forecasts, including the above elements, we revise our profitability guidance for AY 2018/2019, well below last year’s profitability, and have implemented action plans to restore profitability going forward. Moreover and in view of deleveraging Greenyard’s balance sheet, the Board of Directors has requested management to review the strategic options of its business portfolio.
“Looking ahead, we remain firmly focused and committed to further strengthening our global operations while driving profitable growth over the long-term, and are taking the necessary steps while ensuring the support of all our stakeholders.”