The production arm of Yeo Valley Organic has fallen into the red for the first time since the credit crunch in 2008 as soaring milk and energy prices wiped out the Somerset dairy’s profits in “a challenging year” for the whole industry.
The group recorded a pre-tax loss of £2.8m in the 52 weeks ended 29 May 2022, compared with a £6.6m profit in the previous year, newly filed accounts for Yeo Valley Production Ltd, which makes Yeo Valley’s branded yoghurt products and own label, revealed.
CEO Rob Sexton said the £9.4m decline in profits was largely the result of the timing difference in passing on inflation to retailers.
Yeo Valley’s accounts highlighted “unprecedented increases” in milk, electricity and gas prices following the onset of the war in Ukraine, with “extreme” inflation in the cost of yogurt and dairy production. Milk price alone had increased by more than 30% in the year, with half of that in the final three months of the period, the group added.
Revenues also fell 2.1% to £258.9m in 2021/22 as volumes dipped following the end of Covid restrictions, while cost of sales increased 3% to £187.8m and distribution costs rose 12% to £13.8m, with administrative expenses falling.
Sexton said Yeo Valley’s core business remained “strong”, with the yogurt market showing “good resilience”.
Price rises have starting filtering through to supermarket shelves since the year end and some deflation is expected in the dairy sector in 2023, with Yeo Valley forecasting a return to the black in the 2022/23 financial year.
“No one could have predicted the scale of the cost-of-living crisis that has materialised, with inflation rising ahead of anyone’s expectations,” Sexton said.
“We’re adapting to the constantly changing environment and demonstrating our resilience in tough conditions. We’re working closely with our farmer suppliers and our customers to ensure viable farming and affordable food for now and the future.
“We’re making production efficiencies and we continue to invest in automation to innovate and advance our long-term strategy and our commitment to nurture and nourish people and planet.”
He added he was “extremely proud” of the Yeo Valley team, who own a 20% share in the family business through an employee benefit trust.
“[They] continue to do a tremendous job in a very volatile environment.
“Supporting our people, working in partnership with our customers and ensuring high quality, healthy and affordable food will always be more important to us than short-term profit.
“We are proud to continue to support the best of British farming and manufacturing for the long term.”
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