Real Good Food Co. has said it is "examining options" for its poorly performing sugar business Napier Brown.
In an interim trading update, the UK company said it is in discussions with several parties over a potential transaction for the business.
"Such a transaction, if successfully concluded, would enable the company to significantly strengthen its balance sheet and focus on more stable earnings growth going forward. A further update will provided in due course," the company said.
Napier Brown has come under pressure in recent months. In September, the UK's competition watchdog, The Competition and Markets Authority, announced it would not launch an investigation into Real Good Food's allegations of anti-competitive behaviour by British Sugar.
Earlier in the year, Real Good Food claimed British Sugar had "imposed" an "anti-competitive" sugar price on its Napier Brown, hitting profits at the unit. The company had initially lodged its complaint with the Office of Fair Trading prior to its amalgamation into the CMA. British Sugar had insisted it had "acted appropriately at all times".
This morning (1 April) Real Good Food warned its group earnings would be "significantly behind current market expectations" for the year.
"Difficulties" in the sugar market along with "significant" one-off transaction costs and legal costs in relation to the discussions with the UK and EU competition authorities have pressured profits for the year ending 31 March it said.
Pieter Totte, executive chairman, said: ''The difficulties in the sugar market have been covered extensively elsewhere but there are signs that prices have reached their low point and will recover over the next two years. As stated above, we are examining options for our sugar business.
"Elsewhere I am delighted with performance in two areas in particular: in cake decoration, Renshaw has performed very strongly and our recent acquisition of Rainbow Dust Colours is already giving us sales opportunities both in the UK and across Europe, while in premium bakery, Haydens has continued to trade well, successfully expanding its customer base. We plan to give additional focus to these attractive sectors over the coming year.''
Shore Capital analyst Phil Carroll said a sale of Napier Brown could improve Real Good Food's focus. "Such a transaction, if successfully concluded, would enable the RGFC to significantly strengthen its balance sheet and focus on more stable earnings growth going forward," Carroll said.