GREENCORE, the world’s biggest maker of sandwiches, could have its annual profits reduced by about 14% if proposed changes to the European Union’s sugar regime are implemented. The stark warning is contained in a detailed analysis published by Goodbody Stockbrokers.

Greencore does not break out Irish Sugar’s profits, but Goodbody estimates the subsidiary’s profits will decline by 39% from €23m in 2005 to €14m a year after all the planned EU reforms are implemented from 2006.

According to Goodbody, every 10% decline in Irish Sugar’s profits impacts Greencore’s bottom line by 3.6%. So a 39% fall would equate to a 14% decline in its profitability. The reduced profits could have implications for the group’s ability to service its near €400m debt, which last year cost €38.8m in interest payments. The company is believed to be refinancing its debt pile in a bid to reduce its interest bill.

Convenience food is now the driver of growth at Greencore following its €427m purchase of Hazlewood Foods in 2000 and accounts for 53% of Greencore’s operating profits.

Beet growing is the most profitable crop for Irish farmers but Goodbody believes the reforms could lead to a reduction in the numbers of growers here. The research, however, said Irish Sugar would remain a viable business for Greencore for at least the next decade.

The company closed its Carlow factory earlier this year as part of a €65m restructuring and all production is now handled from Mallow, Co Cork. Goodbody expects the company to recoup €34m in asset sales.

Under the current proposals, the support price for sugar would be cut by a third and the minimum basic beet prices would fall by 37% over three years. Production quotes would be reduced by 16% over four years and subsidised exports virtually eliminated. Goodbody predicts however these proposals will be watered down by the time the commissioner unveils the new regime in November.