Greenyard profits at upper end of guidance following challenging AY
Thanks to Greenyard's Transformation Plan, the company says it has landed full-year profitability at the upper end of its guidance for its accounting year, at €64.5 million (about US$72.4 million).
This is fortunate news considering the company mainly saw decreases in net sales and Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) during its accounting year, ending March 31.
According to the corporation, it experienced a number of challenges during this period.
One of these was fierce market pressure in its Fresh segment. In this segment, the company is transforming its business model into a partnership model. It faced another difficulty when extremely dry growing conditions affected its prime harvesting season for segments Fresh and Long Fresh. Finally, Greenyard dealt with a recall action in its Frozen division.
Following these obstacles, Greenyard said it took it appointed a new co-CEO, Marc Zwaaneveld, to help transform the company. Now executing its Transformation Plan, the company notes it is seeing the first indications of recovery.
The company has reported that its overall net sales amounted to €3.911m (about US$4.4m) during its accounting year. This is more than 4% lower than its year-on-year figure.
When it comes to sales in its Fresh segment, sales amounted to €3.188m, down 4,6% from last year's total. The corporation comments that this drop was mainly due to a volume decline from continuing market pressure in most of its key markets. A second factor was the effects of last year's extreme weather conditions.
In Q4, Fresh slightly recovered from its Q3 low performance by reaching sales of €810m (about US$913m), down 5% year-on-year. Its Q3 sales were €730m, down more than 6% year-on-year.
Meanwhile, sales in its Long Fresh segment amounted to €722m (US$813m), down 2.7% from the previous period.
Greenyard explained the decline in Long Fresh was primarily due to the recall. Related delays in production and distribution of Frozen products in the summer of 2018 also played a role. In addition, the extreme weather conditions during the summer resulted in lower crop yields. These were only partly offset by better product mix and prices.
In Q4, the company said Long Fresh continued its steady recovery from the previous period. Q4 Sales amounted to €196m (US$220m), up less than 1% year-on-year, versus Q3 sales of €195m.
As for Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA), the company saw an adjusted EBITDA that reached the upper end of the guidance. Greenyard’s adjusted EBITDA amounted to €64.5m (US$72m), at the upper end of the range of its guidance given in January 2019.
Greenyard attributes the decrease of €64m year-on-year (-50%) to a number of elements.
Starting with Fresh, the ultimate low adjusted EBITDA of €25m versus €73m last year (-65,7%) resulted from a drop in sales. This resulted from the continuing competitive market pressure as well as the price, quality and quantity effects of the extreme weather conditions.
In Long Fresh, the adjusted EBITDA amounted to €42m for the accounting year. This figure was 26% lower than its € 57m figure last year. A loss in volumes and lower cost absorption, of which the majority is due to the recall in Greenyard’s Frozen division, and the extremely dry summer are the main drivers of the decreased adjusted EBITDA.
Future accounting year financial aims
Greenyard says it remains on course in executing its Transformation Plan. The Transformation Plan is expected to result in an increase in adjusted EBITDA of €20m (US$22m) in the 2019-20 accounting year, with a cumulative increase of €44m (US$49m) for the following accounting period.
It points out that this would result in an adjusted EBITDA of more than €100m (US$112m) in the 2020-21 accounting year. Greenyard already notes that its April 2019 performance ended above budget and above last year.
The company adds that its partnership models continue to perform well and show resilience and stability in challenging market conditions.