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Greenyard: A Death Spiral?

SA Focus On Europe profile picture
SA Focus On Europe


  • Greenyard cuts its full-year EBITDA by almost 50%, breaching the already relaxed debt covenants.
  • The vegetable producer will have to issue new shares or sell a division to reduce its net debt to bring the debt levels back in line with the covenants.
  • The earnings season has started in Europe: some companies performed well, others disappointed (once again).
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Welcome to this new edition of Focus on Europe where a Belgian vegetable company sees its share price spiraling down after yet another profit warning. There doesn't seem to be a good solution for the company's issues and it will either have to sell a division or execute on a very dilutive capital raise to satisfy its lenders.

Did you miss the previous edition of Focus on Europe wherein Metro Bank (OTCPK:MBNKF) was discussed? You can re-read that article here.

Greenyard: from 21 EUR to less than 4 EUR in 18 months, what happened?

Greenyard's (EBR:GREEN) share price performance could win a prize for 'worst performing stock of the year'. The company, a family-controlled company focusing on (frozen) vegetables in Europe had to deal with two events that ultimately helped to contribute to a perfect storm.

Source: Yahoo Finance

The initial problems started in July (the first yellow circle) when Greenyard had to confess its Hungarian plant encountered some issues and has been producing frozen vegetables from a listeria-contaminated freeze tunnel. The fall-out was widespread as the company had to recall products with a total of tens of millions euros to be destroyed. Greenyard was insured but would still have to foot a bill of 25-30M EUR after taking the insurance payout into account. On top of that, it had to start working on regaining credibility with its customers, and that also takes time.

Fortunately, the company's lenders understood this was a non-recurring event and continued to support the company. But then, Greenyard was hit by a second (usually non-recurring) problem: the weather.

Europe was hit by extreme drought in the summer of 2018, and this had a negative impact on Greenyard as well, as the company had to deal with 'irregularities' in harvesting, leading to shortages of 30-50%.

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This article was written by

SA Focus On Europe profile picture
Focus On Europe is a newsletter published every other week that focuses on European investment opportunities and stories. Written by The Investment Doctor, the letter focuses on key macro stories as well as specific investment ideas ranging from small to large cap in Europe. This is exclusive for Seeking Alpha PRO+ subscribers who may be looking for more ideas outside of the US. Read more about SA PRO+ here - https://seekingalpha.com/proplus

Analyst’s Disclosure: I am/we are long NYRSY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I also have a long position in Greenyard (unfortunately)

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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