Northern Foods still struggling in frozen

By Rod Addy

- Last updated on GMT

Related tags: Northern foods, Cost, Generally accepted accounting principles

Northern Foods still struggling in frozen
Northern Foods is still working to address declining profitability in its frozen foods division, the company announced as it unveiled its full-year...

Northern Foods is still working to address declining profitability in its frozen foods division, the company announced as it unveiled its full-year results.

Chief executive Stefan Barden said: “Disappointingly, profitability declined in our frozen division and we are working hard on our plans to stabilise this performance.” Pastry and meat-free grill products under performed in particular. “We took steps to address these issues, including acquiring the rights to the McDougalls pastry brand and assets, restructuring at our meat grills business and the launch of the George Foreman Lean Mean Grillers range.”Northern Foods’ Goodfella’s pizza brand continued to lead the market, he said, but as overall pizza production was based in Ireland with exports flowing mainly to the UK, business was hit by the increasing strength of the Euro. In addition, volumes in its pizza business fell in the autumn as a result of rapid and successful action taken to recover significant commodity cost increases. Its meat grills business had also been hit by last year’s poor summer.

However, the company said its chilled and bakery divisions were seeing profit and revenue growth. It said it had continued to rationalise its ready meals range, exiting unprofitable business in order to increase efficiency.

Barden said Northern Foods had taken a series of measures during the year in an effort to boost efficiency across the business. “We have culled badly selling products, exited unprofitable retailer own label contracts and eliminated unprofitable promotions. We have exited or mothballed unprofitable assets and driven efficiencies across the business, taking out cost where sufficient value is not added or where we are not achieving world-class performance.”

The business continued to strive to improve performance by rationalising staff and increasing automation as well, said Barden. “We expect capital expenditure to increase in the new financial year as we invest in a number of capacity and efficiency improvement projects across the group, including seasonal biscuits packing automation in the bakery division.”

However, he said Northern Foods had acted to improve employee training and development. “We have committed £450,000 to helping 90 technical graduates through university over the next five years, boosting food science resource for the industry as well as ourselves.”

Regarding the company’s acquisition of the Baxter’s chilled soup site in Grimsby, he said: “Investment in brand advertising and costs to commission the Grimsby facility during the first half-year are expected to result in profit being more second half phased, in addition to the typical seasonal bias.”

Northern Foods recently announced plans to mothball its Fenland Foods factory following the failure to reach agreement with Marks & Spencer, the facility’s sole customer, on how to return it to profitability. “Given the facility’s excellent track record and reputation, we are seeking new customers with whom to develop the site in the future,” said the processor. The site was making Italian-based cuisine for the retailer.

The company reported pre-tax profit up 25.3% from £40M to £50.1M on sales up from £888.5M to £931.9M in the year ended March 29.