Profits up as jobs go at Northern
May 28 2008 by Iain Laing, The Journal
NORTHERN Foods has unveiled higher-than-expected profits just a week after announcing it would shut a factory employing 730 workers.
The group, which supplies retailers including Marks & Spencer, benefited from improved trading in its chilled foods and bakery divisions as profits from continuing operations lifted £10m to £50.1m.
Northern, which has 900 staff at its ready meals plant in Carlisle in Cumbria, said the current trading environment remained challenging, but added it was committed to recovering continued commodity cost pressures.
Northern said material costs in the year to March 29 were almost 5% higher than a year earlier, representing an annual impact of £40m. The pressure came as Northern undertook the first phase of a three-year strategic plan aimed at boosting profitability.
Northern said earlier this month it was mothballing its Fenland Foods site in Grantham, Lincolnshire, in August and a 90-day consultation period had begun with the 730 staff over the future of their jobs. But it said it is not looking to reduce numbers at its Carlisle site.
It has culled poor-selling products, exited some retailer own-label contracts and ditched unprofitable promotions.
Chief executive Stefan Barden said: “This disciplined, performance orientated approach has improved profitability.” The company, which employs 11,000 people, said an area of concern remained its frozen foods division, which saw profits fall to £11.4m from £18.4m.
Its Goodfella’s brand held its market position, but overall pizza profitability was lower than last year while the company’s pastry and meat business also underperformed.
It hopes to revive the meat business through a new grill range, under the George Foreman’s Lean Mean Grillers brand.
The company’s bakery division entered the year with declining revenues and margins, but reversed the performance by concentrating on Fox’s and Matthew Walker puddings and ditching unprofitable private label contracts.
Underlying revenues for the division were ahead 3.9% for the full year, with average selling prices up 6.6% following the recovery of significant cost increases, particularly in chocolate and flour. Profits from bakery operations increased by 17.3% to £14.9m.
Northern said its chilled businesses – based on sandwiches and salads and ready meals – continued to enjoy growth, with profits from the division up to £22.1m from £14.6m. The company generates around three-quarters of its total revenues from trade with Asda, Marks & Spencer, Morrisons, Sainsbury’s and Tesco.
