Protein giant Boparan Holdings has suffered a £33.5m full-year loss as a result of a “perfect storm” of inflation, the horsemeat scandal and its acquisition of Vion’s UK operations.
The business – which is the holding company for 2 Sisters Food Group – saw operating profit fall by 14.4% to £92.2m for the year to 27 July 2013 on total sales of £2.9bn, up by 23.3%.
Losses for the year stood at £33.5m after exceptional items, interest and tax compared with a profit of £42.5m the previous year.
“Trading conditions have been very tough, with inflation impacting cash-squeezed consumers and the impact of the horsemeat scandal on the food sector”
Ranjit Singh Boparan, 2 Sisters
“Trading conditions have been very tough, with inflation impacting cash-squeezed consumers and the impact of the horsemeat scandal on the food sector,” said Ranjit Singh Boparan, CEO of 2 Sisters Food Group.
The former Vion UK poultry operations – which Boparan acquired in a major deal earlier this year along with some of Vion’s UK red meat assets – were currently loss-making, but the group had initiated an integration plan that aimed to ensure the business broke even next year, he added.
Operating profit margin was down 1.4 percentage points, to 3.2%, reflecting the group’s greater weighting towards the protein sector during the year, which operated with lower margins than chilled and branded, Boparan Holdings said in a trading statement this morning.
In the protein division, like-for-like sales increased by 9.2% and like-for-like operating profit was “slightly ahead” of last year as the company had invested in efficiency projects and customer sales growth, it said.
“We expect the impact of price inflation to continue to impact volumes in the short term and are working with customers to offer value to consumers,” the company said.
In chilled, like-for-like sales were up by 5.2% with lower operating profits as a result of “the horsemeat issue impacting the beef-related ready meals sector, under-recovery of commodity inflation, adverse sales mix and disruption from product transfers”.
The company was taking action to address those issues but expected them to still affect profitability in the first half of the current financial year.
Branded division
In Boparan’s branded division – which includes Fox’s Biscuits – sales were down by 1.9% on the previous year as a result of legislation changes to promotions, and because the company exited some own-label business in biscuits. However, the division had delivered a “steady profit improvement” with tight cost management and efficiency improvement, the company said.
The group expected the trading environment to remain tough, said Singh Boparan, but he added: “We believe we are taking the right actions to improve margin by addressing cost base through Vion integration and consolidation of processing sites, driving our brands and innovation and addressing inflation recovery and sales mix in chilled.”
On a like-for-like basis, excluding the impact of the Vion acquisition, sales for the group were up by 5.6%, to £2.4bn; operating profit was down by 3.9%, to £103.5m; and operating profit margin was down 0.4 percentage points, to 4.2%.
Net debt grew to £566.7m, up £32.9m.
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