Convenience food group Greencore said today it expects its full-year results to be at the lower end of market expectations as industrial action and slow recovery from inflationary pressures hit demand and volumes.
"It's a difficult, volatile market, and the business has got off to a slower start to the year than envisaged," its chief executive Dalton Philips said.
Greencore said while inflation has been easing in some raw materials and packaging, labour and energy costs continued to hit earnings.
The group, which is the biggest pre-packed sandwich maker in the UK, said it is focusing on recovering costs from customers.
In a trading update, Greencore said its first quarter reported revenue increased by 19% to £463m, driven by inflationary effects, but its overall manufactured volumes were modestly behind the same time the previous year.
Greencore said that revenue in its "Food to Go" categories increased by 14.5% compared to the previous year to £291.1m on the back of inflationary effects.
It noted that the impact of Covid on last year's figures was offset by the disruption impact of railway strikes in the UK during the period under review.
Volumes in the unit were slightly behind last year with increased sandwich volumes being offset by lower demand in sushi and salads, it added.
Revenue from distribution of third-party products was also impacted by lower volumes which were about 10% behind last year.
Revenue in its "Other Convenience" division rose by 27.6% to £171.9m - again on the back of inflationary effects and the addition of new business in ready meals.
Greencore said that overall growth in the business was driven by strong volumes from its ready meals business due to the new business win, as well as a strong performance across ambient
sauces.
The Dublin-headquartered company said that while some raw materials and packaging inflation is easing, labour cost and energy inflation remains relatively high.
"The group continues to focus on recovery of inflation from customers, and while we expect to recover the significant majority of inflation, we now anticipate a lag in that recovery," it stated.
It also said it remains cognisant of the short term potential impact of the volatile recessionary environment and the cost-of-living factors on consumer spending for the rest of the year.
Dalton Philips said that Greencore was doubling down on its initiatives on inflation recovery, and in parallel, driving harder and faster to get its cost base "to the right level".
"After just four months in the business, and notwithstanding the obvious challenges, I remain highly enthusiastic about the longer-term future of Greencore," he said.
"Strategically we are well positioned for the future growth given our customer base, the categories in which we operate, our operational capabilities and critically the people behind all of this," he said.
"However, the immediate focus is to tackle the shorter-term self-help actions which set the foundations for margin recovery," he added.
Shares in the company were lower in London trade today.
