2 Sisters CEO Ranjit Singh has predicted strong headwinds for the poultry giant in 2017, as inflation driven by the weak pound batters the market following the Brexit vote.
“The market remains very difficult following the uncertainties around the UK’s decision to leave the EU,” said Singh. “Currency-driven inflation and the price-pressured retail grocery market will make next year one of our toughest.”
His warning came as 2 Sisters reported a strong set of Q1 figures that showed a 5.1% year-on-year rise in total sales to £818.3m, with like-for-like sales up 2.4% to £797m during the 13 weeks ended 29 October 2016. Operating profit across the group was boosted 11.9% to £19.8m, while pre-tax profit was at £18.7m, £1.1m higher than the same period last year.
Overall like-for-like sales in protein, the group’s core division, rose 1% at £535.4m, while operating profit was down £2m to £6m for Q1, in which developments had included additional wing business with Iceland. The figures did not include Bernard Matthews, which the group swooped to acquire in September.
“The expanded capabilities at our Scunthorpe and Derby sites will enable us to deliver more volume and extended product offerings in added-value protein in 2017,” said Singh, who added the red meat subdivision was restructuring to improve efficiency and reduce overheads.
Figures for protein did not include sales through Bernard Matthews, which is yet to be integrated with 2 Sisters as the Competition & Markets Authority investigates the September acquisition of the fallen turkey supplier.
Investment projects in the 2 Sisters’ chilled division were on track, added Singh. They had been supplemented by major product launches, including traditional British ranges and early launches of new Christmas sandwich lines. Like-for-like sales increased by 5.8% to £156.6m and operating profit was up 209.1% to £3.4m.
The branded division was also performing well in Q1, with like-for-likes up 4.9% to £105m and operating profit rising by 30% to £10.4m. Sales from Fox’s Biscuits have helped deliver the positive results, said the 2 Sisters CEO. “The expected headwinds of ingredient inflation have been mitigated with cost-to-serve and logistics initiatives with our customers and a reinvigorated waste reduction programme in factories, in addition to a marketing spend reallocation to drive sales in-store.”
Looking to next year, efficiency and innovation, supplemented by targeted investment, would help drive profitable sales and protect the business in a volatile operating environment, it concluded. “EU exit uncertainty, as well as cost pressures and the tough grocery market, are likely to remain for the foreseeable future.”
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