Commodity price hikes dent profits at UB and Finsbury Food

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Brexit-related commodity inflation has eaten into the profits of two more major UK food suppliers, according to figures released this week.

Biscuit giant United Biscuits, now part of Pladis, and listed private label bakery Finsbury Food Group have both revealed that mounting input costs have hit their bottom lines.

Newly filed accounts at Companies House for UB show adjusted EBITDA for the year to 31 December 2017 dropped 17.4% back to £135.4m as profits were hit by the relative weakness of the post-Brexit pound and rising commodity prices.

UB pointed to price inflation in cocoa, fats, oils and flour as contributing to lower margins. Headline sales edged up 0.7% to £874.5m as the market share of its UK brands, including McVitie’s, fell from 25.8% to 25%.

Headline pre-tax profits more than doubled from £92m to £191.4m, though this was primarily driven by one-off gains related to the sale of its Middle East, North Africa and Saudi Arabia exports businesses.

Similarly, Finsbury Food Group this week reported a 65% slump in profits for the year to 30 June, driven by the soaring price of butter and closure of its Grain D’Or bakery.

The Grain D’Or closure late in 2017 hit Finsbury with an extra £12m in costs and was driven in large part by a 25% hike in year-on-year butter costs [AHDB May 2018].

Nevertheless, the bakery group recorded a “resilient” performance despite the closure and the “unprecedented inflationary environment”, it said.

The cake maker said it had become more “resilient through M&A, having purchased free-from supplier Ultrapharm in a deal worth up to £25m. Total group sales fell 3.4% to £303.6m due to the closure of the loss-making Grain D’Or, but like-for-like sales improved 2.4%.

“We were beginning to make headway [with Grain D’Or], but the sustained inflation in butter meant that there were losses which we weren’t prepared to carry on making,” said group finance director Stephen Boyd.

“We’ve been exposed to real inflationary pressures and the right response is investment. Finsbury will keep looking to invest in our products and new formats.”