UK food producer Northern Foods today (13 March) issued a trading update that warned of declining profits and said that it was planning to undertake a review to examine the company’s business model, product portfolio and cost base.

The maker of well-known brands such as Goodfella’s Pizza and Fox’s biscuits described fourth quarter sales as “very disappointing” in the second profit warning it has issued in as many months. The company said that it anticipates underlying pre-tax profit for the financial year to 1 April of GBP45m (US$77.819m), down from GBP62.2m reported a year earlier.

Northern Foods said that a downturn in sales and increasing in expenses had adversely affected profits. The company said that delays in pushing price increases through had hindered its ability to offset major rises in energy costs.

The bakery division has been seriously affected by a downturn in the biscuit unit, with January and February sales declining by 12% from that period last year. Hilary Baker, director of communications at Northern Foods, told just-food that such a substantial drop in sales requires investigation, with the strategic review of this unit focusing on exposure to market and cost cutting.

The chilled division has also experienced volume and margin attrition, with sales of pastry products in January and February down 11%. Similarly, Baker said, the business review will focus on increasing margins.

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“Sales in bakery and chilled pastry have declined significantly,” Baker observed. “We now have to assess why sales are down. The strategic review will also consider how we can best support lowering the cost manufacturing model.”

Baker was unable to rule out the possibility that the review would call for the disposal of some assets, but did say that Northern Foods is “looking at building on positive changes we have already implemented.”