Northern Foods has snapped up ready meals and snacks supplier Ethnic Cuisine in a bid to expand its customer base in chilled food.

Swansea-based Ethnic Cuisine, which turned over £24M in the year to March 31, has particular expertise in oriental foods and would increase Northern's trade with Sainsbury and Brakes, said Northern Foods chief executive Stefan Barden.

Operating margins in Northern's chilled foods division have risen from 3.9% to 5.9% in recent months on the back of initiatives to cut waste and improve efficiency.

However, it should be possible to increase them to 7% by 2010, predicted analysts.

The immediate priority, however, was improving profitability in biscuits. This would be achieved by abandoning low-margin retail own-label contracts, launching more premium products under the Fox's brand, reducing unprofitable promotional activity, and increasing automation, said Barden.

Northern has already axed 11% of its biscuits range since last year he said. "Intense work on the biscuits business is beginning to yield results. Production efficiencies will be driven by new investment in automation, generating rapid payback."

Performance in Northern's frozen division was mixed, with dismal results from meat grills and pastry, but better results from Goodfella's pizzas, he added.

Northern posted a 37.7% increase in pre-tax profit to £20.1M in the 26 weeks to September 29.