2 Sisters Food Group is feeling the effects of the supermarket price war with boss Ranjit Singh warning that trading conditions would remain difficult for the business in what was the “toughest commercial environment” he could recall for many years.
The comments come as the private food group’s parent Boparan Holdings publishes its second quarter figures showing like-for-like sales fell back by 1.3% to £807.3m and profits were hit by the avian flu outbreak.
Total sales at 2 Sisters in the 13 weeks ended 31 January 2015 fell 6% to £797m, compared to £848m a year earlier, as it sold off Avana Bakeries business and sandwich manufacturer Solway Foods.
However, like-for-like chilled sales were up 2.9% as the division moved into recovery phase following the impact of the horse meat scandal which hit the ready meals market.
Adjusted operating profit dipped slightly from £13.3m to £13.1m but after £20.7m of exceptional costs for the outbreak of avian flu across Europe and problems with a new IT system were factored in the group made a pre-tax loss of £7.6m, which was better than the £13m registered a year ago.
“This has been another challenging quarter for the group,” 2 Sisters CEO Ranjit Singh said. “Against this tough back drop, yet again we have delivered for our customers over the key Christmas trading period. Given the hurdles we are currently facing, we have delivered a creditable performance and are stabilising the business.
“This is the toughest commercial environment I can recall for many years with substantial changes at many of our larger customers. We expect conditions to remain difficult, but are firmly focused on delivering quality and value to all our customers.”
On the back of substantial deflation within UK poultry, the protein division saw like-for-like sales decreasing by 2.8% for the quarter and reported a £3.6m reduction in adjusted operating profit. Branded like-for-like revenues were broadly flat in what Singh said was a highly competitive and aggressive market, with continued pressures on sales mix and promotions. But frozen performed well with sales ahead by 5.4% on a like-for-like basis and market share growth with the Goodfella’s and Holland’s pies ranges was “strong” – up 3.9% and 15% over the first half year respectively.
“The tough trading conditions for food manufacturers and our retail customers look set to continue, the group added. “External factors have adversely impacted our poultry division’s performance, and we are working hard internally to mitigate this and improve our efficiency and effectiveness at all our UK poultry sites.
“We expect group profitability in Q3 to continue to be negatively affected by the effects of avian flu, as international boundaries remain closed to our products.”