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2 Sisters hit by headwinds as profits falter
Published:  24 March, 2017

A competitive market and “strong headwinds” have hit profits at Boparan Holdings, parent company of 2 Sisters Food Group, in the second quarter of the year.

Its overall like-for-like operating profit was down 11.4% year-on-year while its profit margin fell from 2.8% in the second quarter of 2015/16 to 2.3% in Q2 of this year. Total sales grew 5.2% while like-for-like sales grew 2.6%.

Operating profit for its protein division was down to £4.5 million (m) from £7.1m in the same quarter of 2015/6. However, its like-for-like sales were up 1.4% on the previous year.

2 Sisters said its supply chain optimisation programme was “creating leaner, more effective delivery systems”.

“Our consolidation of the retail packing function at Red Meat is now complete and will release significant cost savings going forward.”

It added that there were more “reconfigurations” planned for later this year.

In its outlook for the year ahead, 2 Sisters said that while “strong headwinds forecast for 2017 have affected the business”, the company was confident these could be mitigated.

“Efficiency and innovation, supplemented by targeted investment, will help drive profitable sales and protect the business in a volatile operating environment. EU exit uncertainty, as well as cost pressures and the tough grocery market are likely to remain for the foreseeable future. However, we are well-placed to deliver for our customers on quality, service and price.”

Ranjit Singh, 2 Sisters Food Group CEO, said: “Our results reflect the very tough trading environment we face. The market is as competitive as ever and currency fluctuations have brought about higher input prices. It is unsurprising that this has put a margin squeeze on a lot of businesses, including our own.

“However, there is underlying positive momentum across the business, as we have seen over the past four trading quarters. Sales are rising, and we are well-positioned to grow with our customers in new markets.

“Competing in our markets requires investment for the long-term, so our supply chain is efficient, sustainable and fit for the future. This has been our approach when making investment decisions, and we are still focusing strongly on a ‘cost out’ and efficiency culture.

“Our Protein footprint programme progresses at pace. We are proud of the substantial upgrade to our facility in Scunthorpe, making it one of the largest and most advanced in Europe. Also, we progress with our restructuring at other poultry locations, and we have now completed a similar exercise in our Red Meat business.

“Investment projects in our Chilled division, at a number of sites, have improved quality and efficiency, and the merger of functions across the division will bring substantial annualised savings.”

He added that the multiple outbreaks of Avian Influenza haven’t impacted its domestic market.

“We have seen an increased outbreak of Avian Influenza this year, but our strict biosecurity measures have limited the impact on our agriculture, although the outbreaks have caused the temporary closure of some overseas markets.

“The market will remain challenging, but as we continue to create a good environment for the long-term sustainability of the business, remain resilient and deliver for customers, our Better Before Bigger strategy will achieve our long-term ambitions.”