Northern Foods withstands commodity pressure

By Charlotte Eyre

- Last updated on GMT

Related tags Northern foods Bread

UK-based Northern Foods yesterday reported a Q3 3.5 per cent
revenue increase, avoiding the current commodity squeeze by passing
costs on to customers.

Sales volumes remained stable over the quarter ending 29 December 2007, but the company achieved the rise in revenues by raising customer prices by 3.5 per cent, the Leeds manufacturer and supplier said in an interim statement. The statement pre-dates the release of the company's full year results, which will be available in April this year. Chief executive Stephen Bard said that the strategy to simplify the business had also helped to increase margins over the corresponding quarter 2006. Early last year, Northern Foods decided to sell off the faltering chilled pastry, cakes, speciality bread and flour milling businesses, in a bid to stabilise revenue. The company now focuses on five key markets; ready meals, sandwiches and salads, pizza, biscuits and Christmas puddings."Our operational plan continues to drive improved performance and we look to enhance this through selective, value creating, bolt-on acquisition opportunities,"​ he said. "Despite the continued challenging market conditions, we are confident that we will continue to make progress in realising the full potential of the business." ​In the year to date, underlying revenue grew by three per cent, he added.Bakery ​Northern Foods said that the bakery division experienced "good seasonal demand"​ over the Christmas period, with the Matthew Walker Christmas puddings, not surprisingly, experiencing especially strong sales. However, sales volumes fell 3.1 per cent, attributed to poor sales of branded biscuits. The company also had to increase customer prices for this division on average by 7.2 per cent in order to boost revenues. Chilled:​ The chilled division demonstrated the strongest performance over the quarter, as underlying revenue grew 5.2 per cent. Unlike for the bakery products, Northern Foods said that volume growth for this division was also up by four per cent.​ Performance was led by sandwiches and salads, while ready meals experienced slower growth, the company said. Focusing on the success of this division Northern Foods said it made "selective investment in additional capacity to create value".​ Recent investments include the expansion of the salads facility at Corby, and the acquisition of Baxter's soup manufacturing plant, announced 11 January.Frozen:​ The price of frozen foods went up 3.2 per cent, and underlying revenue decreased slightly by 0.9 per cent. The recent acquisition of a frozen pastry brand will not have financial repercussions until the end of the year, the company said. Overall, the interim statement reassured investors yesterday, as Northern Foods shares rose 6.3 per cent in early trading yesterday, up just over 5p to 89p. Investors now expect the company to match analysts' forecasts of pre-tax profits for the year to March of £47.5m (€60.5).

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