The storm Belgian company, Greenyard, finds itself it has not yet abated. The company's stock market value has been dealt several blows this year. Now, it is the banks turn. Since the company has too much debt, CEO Hein Deprez has been ordered to tighten the company's belt. This became apparent at last week's shareholders meeting.
Earlier last week, Greenyard convinced the banks to allow the company's debt to keep climbing until March next year. In this way, the company has bought itself some time. But this extra time is being paid for in additional fees and a higher interest rate. The debt ratio is rising due to the lower REBITDA expected this year. Greenyard started the year off with a projected growth of 10%. They have, however, had to adjust that number because of an expected 25% shrinkage.
Hein Deprez, Greenyard's CEO.
As a result, the debt ratio has increased to above the 3,5 times the REBITDA, as agreed with the banks. Last year, the company reported a net debt of EUR400 million. The Belgian newspaper, De Standaard, has estimated that, with the company's factoring debt, this negative balance will double. It calculated that the final figure would be around EUR800 million. According to this newspaper, this is because Greenyard resells its client invoices. They then immediately receive the client's assets.
Horticulture sold; mushroom company to follow?
Divestments are, therefore, inevitable. At the meeting, Greenyard announced its intention to sell its Horticulture division. The potting soil and substrate branch will be sold for EUR120 million. The buyers are the investment fund, Straco. Greenyard Horticulture is a market leader in Belgium, France, Poland, and the Ukraine. The division exports to 60 countries. The deal is expected to be completed in the fourth quarter.
Hein Deprez further explains this decision in a press release: "Now, we need to focus on improving our profitability. We also need to decrease the company's debt ratio. In our other two branches (Fresh and Long Fresh), our strategy remains unchanged - to build strong relationships with our clients. We remain very enthusiastic about cooperating with our growers. We will also keep jointly developing new concepts with retailers. These create value for all the parties in the chain. The reorientation toward the Fresh and Long Fresh divisions will enable more focused management attention. This means meaningful operational improvement strategies can be implemented faster. It will also focus on profitable internal growth. For us, divestment is a decisive step toward a stronger Greenyard.”
Shareholders proposed other parts of the company that could be put up for sale. It was, for example, suggested that the mushroom company that Greenyard acquired last year, also be sold. Shareholders wondered whether this division fits in with the company's core activities. "We are taking a close look at all our activities at the moment. I hear what you are saying", is how Flemish business newspaper, De Tijd, says van Hein Deprez reacted. Greenyard is considering, among other things, sale-and-lease-back operations. Suffice to say; not all the shareholders were enthusiastic about this idea.
Dole, Listeria, and supermarkets
In December 2017, Greenyard's share market price skyrocketed when the company's plans to buy out American multinational, Dole, were leaked. In the first weeks of this year, Greenyard experienced its first setback on the stock exchange. The takeover deal did not materialize, and Dole fell into the hands of the Irish company, Total Produce. Then, in the summer, a listeria outbreak struck the company's Hungarian frozen goods factory. Since 22 January, no other company has lost so much value on the Belgian stock exchange as Greenyard. “That is, indeed, genuinely distressing", says Greenyard's CEO, Hein Deprez, in De Tijd.
The Listeria contamination has since been brought under control. The Hungarian plant is operational again and control mechanisms have been tightened. This situation's costs are estimated to be less than EUR30 million, after insurance. But the troubles are far from over. The hot summer has meant lower profits for the Fresh and Long Fresh divisions. This, in combination with the difficult situations in Germany and Belgium, has forced this multinational to take drastic steps.