2 Sisters’ profits hit by harsh environment

By Aidan Fortune contact

- Last updated on GMT

2 Sisters experienced a dip in sales and profits for the quarter
2 Sisters experienced a dip in sales and profits for the quarter
Retailer price pressure, inflation and production disruptions have led to a drop in sales and profits for 2 Sisters Food Group.

In the 13 weeks to 28 July 2018, it reported that total sales had fallen 1.5% year-on-year, down from £815.7m to £803.7m, while its losses were £53.8m, compared to a £17.6m loss for the same period last year.

In a statement, the business said that the quarter “reflects the harsh external environment coupled with underperformance in some parts of our business, which have negatively affected profit margins. Reduced sales and profit reflect business disposals as well as the tough operating environment. Retailer price pressure and a lag on customer price increases, inflation, the weak pound and weather have all been factors, in addition to site closures and the associated short-term operational disruption”.

The business recently underwent a raft of significant senior changes​, with new chief executive officer Ronald Kers bringing in ex-Müller staff.

On the results, Kers explained that these staffing changes were part of an improvement plan. “Our Q4 results reflect the difficult macro-economic backdrop and the challenges we have faced in our own business. Against this backdrop we have a clear strategic plan, which we are executing at pace to improve business performance.

“We remain focused on addressing our core UK and European poultry operations and providing the right environment for our Chilled and Branded businesses to flourish. The high level of non-cash exceptional costs reported during the period reflects a reset of the baseline of the business and provides a platform for turnaround. I am pleased to report a significant new customer contract in our Chilled business with a strategic customer, which underlines future growth and investment.”

The business’ balance sheet is set to be bolstered by the completion of disposals next year. In October, 2 Sisters agreed to sell its Manton Wood sandwich business to Samworth Brothers​ while in July it agreed to sell its red meat division to Kepak​.

“The completion of two major disposals (with a further expected to complete in early 2019) strengthens our cash position and improves our financial flexibility, and I have immediately begun our transformation with a strengthened leadership team​,” said Kers.

He added that the business’ new direction would improve processes across the board.

“Under my leadership we will strive for excellence in execution of everything we do, improve our processes and systems and ultimately build a high performance culture that’s about discipline, agility and making products that realise as much value for us as they do for our customers.

“By focusing on our core with a new team, we are laying strong foundations for a more consistently performing and profitable future. I expect to see the margin improvements associated with the turnaround programme from our third quarter onwards.”

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