Asda’s direct sourcing arm International Procurement and Logistics saw a near 23% jump in pre-tax profits last year as it made procurement savings for the WalMart-owned supermarket.

IPL’s revenues dipped by 1.6% in the year to 1 January 2016 to £198.3m, primarily due to strong exchange rates enabling it to decrease sale prices into its parent company Asda.

IPL, which establishes trading terms with almost 2,000 separate suppliers across fresh produce chilled and ambient goods, saw its operating profit jump 23.1% during the year to £16.3m and pre-tax profits leap 22.9% to £16.6m.

This boost in profitability was due to “improved purchasing cost control”, while the company also implemented a number of operational efficiencies.

Asda said in a statement to The Grocer: “IPL results are consolidated into Asda Group Limited, their purchases become part of our consolidated costs. Dealing directly with primary producers is a key enabler, helping us deliver our Low Cost Operating Model, and pass savings on to our customers.”

Asda’s own operating profits climbed 3.3% to £1.1bn in the 12 months to 31 December but sales plunged 3.7% (4.7% on a like-for-like basis) from £23.2bn in the previous year to £22.4bn.

Despite the efficiency drive at IPL, employment costs increased by 31% during the year to £58.6m as the average headcount rose from 1,795 to 2,198 in the period.

During the period IPL also expanded its operations into the procurement of ambient produce for other WalMart companies.

IPL also bought the potato division of Fenmarc Produce in early 2015, partly explaining the rise in staff numbers.

Post balance sheet IPL acquired full ownership of fresh supplier JVs Forza AW and Kober.

The performance of these subsidiaries largely followed that of their parent company IPL, with sales down and profits up during 2015.

In the year to 2 January, sales were down 3.7% at Forza to £290.7m due to lower pork commodity prices, but pre-tax profits were up 15.6% to £27.4m thanks to cost control, improved sales mix and efficiencies.

Kober saw sales slide by 9.4% to £127.7m as pork prices fell, but similarly pre-tax profits were up by 21.1% to £2.6m.

The IPL accounts stated: “The directors are satisfied with the results and achievements during the period and believe that the future prospects of the company are sound and consider that the business is adequately financed.”

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