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Profits and Margins Tumble at 2 Sisters Food Group

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Profits and Margins Tumble at 2 Sisters Food Group

Profits and Margins Tumble at 2 Sisters Food Group
November 09
10:51 2017

Adversely impacted by rising commodity inflation that was not fully offset by price increases and its cost reduction efforts along with several exceptional items, Boparan Holdings, the parent company for 2 Sisters Food Group, has reported a 5.3% decrease in sales and a 47.4% decline in operating profit for the fourth quarter ended 29th July 2017 compared to the corresponding period in 2016. For the full year, although total sales increased year-on- year by 5.1% to £3.289 billion, with like-for-like sales ahead by 2.9%, operating profit fell by 24.5% to £68.3 million and by 28.7% on a like-for-like basis. Full year operating profit margin dropped 80bps from 2.9% to 2.1% and by 90bps from 2.9% to 2.0% on a like-for-like basis. 2017 profit after exceptional items, before interest and tax was £40.6 million lower than 2016 at £22.8 million.

2 Sisters Food Group is Britain’s biggest food manufacturer. The group produces around a third of all the poultry products consumed in the UK and also supplies to continental Europe. In addition to poultry, 2 Sisters’ Protein division incorporates red meat operations. 2 Sisters is also a major player within the UK chilled and frozen food categories, and has developed a strong brands portfolio including Fox’s Biscuits and Goodfella’s Pizza.

Ranjit Singh Boparan, chief executive of 2 Sisters Food Group, comments: “The business continues to face into an extremely tough trading environment with further increases in input costs. Clearly margin performance improvement is a top priority, and this will be underpinned by working hard on the action plans that make the most difference to our core business. Nevertheless, we remain positive about our top line growth and how that positions us with our customers.”

He continues: “We continue to progress our Poultry footprint changes, which delivers quality, safety and a shorter, leaner, more transparent supply chain. We are investing in our people and our sites, with a view to optimising available capacity.”

2 Sisters has embarked upon a £150 million investment programme across its UK poultry business. Launched at the end of 2015 and phased over three years, the programme is designed to further align the poultry business with the needs of its customers, to create world class facilities utilising state-of-the-art technology, and to drive efficiency.

2 Sisters’ Meals division, which produces a range of own-label products including ready meals, soups and sauces, has also benefitted from rationalisation and investment, designed to provide a springboard for further growth. “However, as with our Branded businesses, cost inflation has negatively affected margins, and our teams are taking ongoing actions to redress the balance,” he points out. “Whilst this will not happen overnight, our management team are focused on delivering our step change plan to enable us to continue on our journey of producing high quality and safe food.”

During the fourth quarter, 2 Sisters temporarily suspended operations at its factory in West Bromwich on 1st October following food hygiene and labelling concerns, highlighted by an undercover investigation by the Guardian/ITV. These actions will impact the group’s first quarter results. Following a comprehensive colleague retraining programme the site recommenced supply to customers from 6th November.

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