Shares in Greencore (GNC) have been on a downward trajectory over the past month. The weakness in the price triggered a management statement on 24 August saying company bosses were not aware of developments since the third-quarter update in July that would spur such an adverse reaction. But what management did note was that Greencore would stop producing frozen products at a site in Jacksonville, Florida, for a large coffee chain customer in the US and instead focus on fresh foods. Although the company said this was being “managed seamlessly” and would have little impact on profitability, the shares fell a further 9 per cent on the day of the announcement.
Analysts at Jefferies downgraded their EPS forecasts for the year to September 2017 by 2 per cent to 14.8p, to reflect a “cautious interpretation” of the developments, but remain bullish on the shares. The frozen food contract in the US is estimated to have contributed around $75m (£58m) in sales, and so the sell-off appears to be "overdone", argued Jefferies analysts, especially given how well the UK division is doing. UK and Ireland food-to-go delivers around half the group’s profits.
