Boporan Warns of Margin Erosion in Second Half
Having just completed the acquisition of VION’s poultry and red meat businesses in the UK, Boparan Holdings, the holding company for 2 Sisters Food Group, has reported a 5.4% increase in like-for-like sales for its second quarter ended 26 January 2013, despite the demanding trading conditions. However, the horsemeat scandal is expected to impact sales of the group’s ready meals and coupled with the VION acquisition, which is currently loss making, these factors will dilute profit margins during the second half of the group’s financial year.
2 Sisters, which employs over 18,000 people and has annual sales of over £2.3 billion, operates from 42 sites in the UK, Ireland, India and Europe, supplying poultry, ready meals, sandwiches, salads, pies, pizza, fish, puddings, cakes and desserts, and biscuits. Its brands include Fox’s biscuits and Goodfella’s pizzas.
Second quarter group operating profit, before restructuring costs, was £27.3 million (up from £25.6 million in Q2 of 2011/12) but after currency factors there was an overall loss before tax of £7.7 million. The operating profit margin at 4.4% was down slightly on the prior year figure of 4.5%
During the second quarter of its 2012/13 financial year, 2 Sisters’ chilled business performed solidly but trading at its branded business remained tough with a recovery in frozen foods offset by a decline in biscuits.
“We made good progress to complete our phased recovery of higher feed costs by the end of Q2, but forward feed prices remain volatile,” comments Ranjit Singh, chief executive of 2 Sisters Food Group. “Looking forward, we also expect considerable volume reduction in our ready meals business during the second half year following media coverage of horsemeat issues, which have impacted the food industry as a whole and beef related ready meals in particular. As a result, we remain cautious on the outlook, with continued inflation and competitive trading conditions in a tough economic environment, alongside the dilutive effect of our VION acquisition. We will need to invest with our customers to maintain sales growth for the remainder of our financial year.”
