Inflation and avian flu hit 2 Sisters profit
Published:  26 June, 2017

A combination of avian influenza, cost inflation and redundancy costs have adversely impacted 2 Sisters’ third quarter profits. 

In its results for the 13 weeks to 29 April 2017, it reported a year-on-year like-for-like operating profit margin drop of 39.4%, from £21.6m in Q3 2016 to £13.1m. It attributed this drop to “one-off items” such as avian influenza hitting its European operations as well as restructuring costs.

Its like-for-like sales were up 3.1% while total sales were up 4.8%. The company’s net debt grew by £83.7m to £794.7m.

Ranjit Singh, 2 Sisters Food Group CEO, said: “This was a tough trading quarter for the business, but there are clear signs in the top line performance that we are pursuing the right strategy to deliver sales and margin performance improvements.

“The competitive landscape remains challenging and our sector faces currency fluctuations which have brought about higher input prices. In addition, our European poultry export business in both Poland and the Netherlands has been affected by avian influenza outbreaks on the continent, and we have experienced some restructuring costs elsewhere in the business.”

Like-for-like sales in its protein division grew 4.8% to £566.8m while operating profit was down by £2.2m to £6.7m, driven by the impact of avian influenza on the European poultry business.

2 Sisters reported that primal poultry continues to “enjoy strong underlying volume growth, in addition to ready-to-eEat products and added value breaded lines enjoying new category growth”.

It also confirmed that it has agreed long-term supply contracts with three strategic customers which will deliver significant volume increases.

“Our Protein Footprint Programme is progressing well and will ensure we have the right product, in the right location at the right time,” said Singh. “Latest developments include expanding our cutting facilities in Scotland and reconfiguring our supply chain to achieve a leaner structure. Following consultation, we have announced the closure of one of our Birmingham sites. We have also strengthened our commitment to reduce poultry waste by agreeing a three-year surplus supply contract with Crawshaws Butchers.”

Looking ahead, the company said the challenges will continue further into 2017 but predicted that “action on price recovery, efficiency and targeted investments should pay off”.

“We see no major changes to the external environment for the rest of the financial year. We remain resilient, adaptable and as committed as ever to deliver for our customers,” added Singh. “Our Better Before Bigger strategy will achieve our long-term ambitions.”

Meanwhile, 2 Sisters has also announced the appointment of Richard Pike as group chief financial officer (CFO). He will join the business officially on July 17, and will join the BHL board. He takes over from Stephen Leadbeater who has decided to resign due to ill health.

Pike most recently worked for Associated British Foods as managing director of British Sugar, having previously held the role of group CFO for AB Sugar. Prior to this, he served as group operations and finance director for Bridgemere.