Bernard Matthews has posted a dramatic £20m loss in its latest full-year results, as bad grain harvests, poor weather and operational inefficiencies took their toll on the turkey giant.
The company today reported a £20.4m loss before tax for the 12 months to 30 June 2013 compared with a profit of £2m for the same period in 2012. Operating loss stood at £11.7m compared with a profit of £5.3m in 2012, while group sales for the year were up marginally on last year, coming in at £346.4m, compared with £341.4m last year.
This year’s losses included £4.3m in exceptional charges related to the restructuring of Bernard Matthews’ Hungarian operations.
Chairman David Joll said the results were “very disappointing” but did not come as a surprise given how much the company had struggled with profitability in recent years.
He attributed the company’s poor performance to a combination of external factors – particularly poor weather and high feed costs, which had driven up production costs – and internal factors, such as poor cost control and planning errors. However, he insisted the company had put in place a turnaround plan that would return it to profitability for 2013/14.
“Costs had spiralled in the business. We got heavy on the management side and had multiple advisors, a lot of whom we’re now shedding”
David Joll, chairman
Last year’s poor grain harvests and high feed prices – particularly for wheat and soya – had pushed up production costs over the past 12 months, and the company had not been able to recover those costs entirely from its customers, Joll said.
“Feed accounts for about 65% of the cost of producing a whole bird, and although our customers in the main have been very understanding, these things take a long time to negotiate. Where we have been able to recover costs, it’s been many, many months after the fact,” he said.
Wheat and soya prices have recently started to come down from the levels seen in 2012, but Joll said Bernard Matthews typically bought feed many months in advance and had therefore continued to be hit by high feed prices in 2013. “It would be absolutely wrong to look at the current situation in the grains markets and draw conclusions about the costs we’re facing,” he added.
Production costs had also escalated in the past 12 months because of the unusually harsh winter in 2012 and the wet spring this year, which had required Bernard Matthews to increase the quantity and quality of feed rations – in turn, driving up the cost of producing birds.
Joll stressed that although this latest set of results was below par, the company had undergone significant change since he took over as chairman in May and especially since turnaround specialists Rutland Partners invested in excess of £20m in the business in September.
“Costs had spiralled in the business,” he told The Grocer. “We got heavy on the management side and had multiple advisors, a lot of whom we’re now shedding. Then there were planning errors - we’re a vertically integrated business and that requires very careful control and planning. Some mistakes were made, which had to be corrected.”
Brand plans
Bernard Matthews recently rebranded its branded cooked meats range, changing the name back to Bernard Matthews from Bernard Matthews Farms and revamping the packaging. Reactions to the revamp had been positive, and the company planned to roll out new packs for its frozen and fresh lines – in line with the changes on cooked meats – after Christmas, Joll said.
He added the immediate focus for the Bernard Matthews brand was to increase its presence in the mid-size stores of the mults, particularly for breaded products. “We are very well represented with our branded products in the big superstores, but in the mid-range stores we don’t have all the space we used to have. We have got to prove that we deserve that space.”
A consumer press advertising campaign for the Bernard Matthews brand is currently underway, and Joll said TV was being considered for 2014.
Christmas
As for the upcoming Christmas trading period, Joll was tight-lipped beyond saying Bernard Matthews had seen strong business on the fresh turkey side, where volumes were up by roughly 10% year on year, as consumers continued to move from frozen to fresh turkey. Crowns were also doing very well, he added, while frozen had seen a marginal “single-figures” decline.
Joll declined to comment on prices, saying it was up to retailers to set them, but reiterated that production costs for Bernard Matthews had been higher this year than for 2012, given the problems with grains harvests and weather conditions.
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