Crisis-hit poultry processing giant 2 Sisters Food Group slumped into the red during the three months to the end of July, and has warned profits will be squeezed further during the first quarter of the new financial year.
2 Sisters saw year on year profits after exceptional items, but before interest and tax, fall by £23m for the 13 weeks to 29 July, according to parent Boparan Holdings’ latest annual report and accounts, as it registered a £17.6m loss. Operating profit also fell 47.4% compared to the same period last year, from £29.3m to £15.4m.
It added that the recent food safety scandal, which led its West Bromwich factory to be closed for a month, would also impact its Q1 results.
The Ranjit Singh-owned supplier also saw margins fall during its fourth quarter from 3.8% to 1.9% as a result of commodity price inflation and foreign exchange volatility, plus one-off costs, as it faced “an extremely tough trading environment with further increases in input costs”, Singh said.
Inflation had been higher than anticipated, the annual report added, and had not been fully offset by price increases and cost-reduction efforts, while full-year operating profit fell 24.5% to £68.3m. However, value sales grew 5.3% during Q4 to £815.7m, and by 5.1% to £3.3bn for the full year to 29 July.
The supplier said the impact of commodity inflation was “particularly acute” during Q4, and as a result price recovery, efficiency and targeted investments had not been fully realised. This would continue into the new financial year as 2 Sisters also had to recover from the food safety scandal.
“Nevertheless, we remain a solid business, with attractive, growing core poultry and chilled markets, with the scale to maximise efficiencies and margin. We remain committed to our step change programme so we can deliver for our customers on safety and quality,” it added.
“We have a clear strategy to turn around each business but recognise that this will take time. Once we successfully negotiate our way through short-term issues, we will be in a stronger position to deliver growth.”
2 Sisters yesterday (6 November) reopened the West Bromwich factory implicated in the Guardian/ITV exposé, which uncovered a series of alleged food safety violations yesterday. “We can confirm that following comprehensive retraining sessions with all colleagues during October, we are restarting production at our site D facility in West Bromwich,” said a spokesman.
It follows an apology by Ranjit Singh to the Commons Efra committee on 25 October when he promised to “put it [the situation] right”, and offered to pay for full-time FSA inspectors at all its cutting plants for the next year in a bid to revive confidence in the under-fire poultry giant.
It was time to “build a better business” Singh added. “We don’t want to buy more businesses; we want to concentrate on what we have got and do better. It’s time to change and I have to change.”