Meat costs squeeze Canterbury's profits

Related tags Food processors Bovine spongiform encephalopathy

Squeezed by rising meat prices and a falling appetite for its
products UK burger supremo Canterbury Foods said its revenues for
the full year will be "substantially below market
expectations".

The warning is a further sign food processors are being substantially hurt by the rising cost of meat and other inputs this year. Rocketing energy costs have eaten into the margins of bothfeed manufacturers and meat processors, leading them to warn of higher prices.

Canterbury's problems can seen in the jump in the producer price index. Materials and fuels purchased by the UK's manufacturing industry rose 12.1 per cent in the year to June and by 2.3 per centbetween May and June. The rise in the input index between May and June mainly reflected price rises in crude oil and domestically-produced inputs used by food processors in their products, thegovernment's statistics unit​ said this week.

The prices of imported materials as a whole, including crude oil, rose 1.2 per cent between May and June. The rises were slightly offset by a price fall in imported chemicals and imported parts andequipment.

Canterbury​ said this week its meat division was suffering a "significant"​ loss of revenue due to a contractingmarket for burgers, a net loss of contracts, price deflation for its products and continued price inflation for raw materials. Burgers account for a third of company sales.

The company said its pastry products and food ingredients unit continues to operate in line with management's expectations. A strategy to consolidate the company's factories remains on track and onbudget, Canterbury said.

The company has suffered four years of losses. The adverse publicity due to bovine spongiform encephalopathy (BSE) and foot and mouth disease affected sales of the company's products.

Three years ago the company lost its contract with Burger King. The current warning reverses expectations of a profit this year. Shore Capital now says it expects the company to make a loss of £1.9mfor the year from its previous forecast of a pre-tax profit of £1.3m before restructuring costs are subtracted.

With the new profit warning Canterbury said it has started a further review of its operating divisions. The company's expects to release its interim results for the 26 weeks to 30 June on 22September.

Canterbury Foods is the UK's largest maker of beef burgers, sausages, and pastry products for the food service and fast-food restaurant industries. The company's brands include Plumtree, Mawbeef,JL and Pin-it. The company's food ingredients business supplies cooked sausages, stuffing, pastry, and bacon, among other products, to food processors. Canterbury currently operates six plants in theUK.

This week UK-based Grampian Country Food issued a warning to customers stating it will negotiate raising prices for its meat products by six per cent with retailers due to the escalating cost ofoil, gas, electricity, feed and packaging.

Like other companies in the same predicament, Grampian said it was hit by energy costs, which have risen by up to 47 per cent over the past year. With the cost of crude oil reaching almost $60 abarrel margins are being whittled away.

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