Bonduelle today (2 March) reported lower margins for the first half of its financial year as “difficult” harvest conditions in France, Russia and the US dented the vegetable processor’s results.
The company said this morning (2 March) its operating margin in the six months to the end of December was 5.9%, compared to 6.3% in the comparable period of last year. That meant operating profit fell to EUR61m (US$64.3m), versus EUR63m in the first six months of fiscal 2015/16.
“The additional cost related to the difficult harvests observed in summer 2016 in France, Russia and United States, recorded in part on the first half of this FY, coupled with a downturn of the activity in Russia, whose margins have nevertheless been preserved, explained the comparative evolution of profitability,” Bonduelle said.
Lower financial costs meant net earnings dipped just 0.2% to EUR36.5m.
Sales, however, increased 1.4% on a reported basis and 1.9% on a like-for-like basis, rising to EUR1.02bn. Revenue outside Europe increased 6.6% offsetting a 0.8% drop in European revenue.
Bonduelle said it expects full-year sales to come in at the upper end of its guidance range of 2-3% with “stable” operating margins, excluding the recently announced acquisition of Ready Pac Foods in the US.
The company revealed last week it is to buy US produce group Ready Pac Foods. Commenting further on the deal today, Bonduelle revealed it will pay US$409m for the business, representing a multiple of 11 x 2016/17 estimated EBITDA.
The deal, which is expected to close in the fourth quarter, will be financed by debt and is expected to be earnings accretive in fiscal 2017/18, Bonduelle added. The company noted that with leverage of 3.5x EBITDA it will retain its investment grade rating.
Ready Pac will become Bonduelle’s fifth business unit and it will be renamed Bonduelle Fresh Americas. The company said the deal would reinforce its presence in the US, increase its exposure to the “fast-growing” fresh segment and expand its footprint in the “consumer convenience and healthy food segments”.