UK convenience foods maker Northern Foods has said first-half trading has remained in line with its expectations, but it plans to close two factories in order to cut costs.
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The company said that underlying sales trends improved from late July once it had passed the anniversary of losing a major savoury products contract with Sainsbury’s in 2003. In the 11 weeks to 18 September, underlying sales increased by 5.5% versus the corresponding period last year, compared with a 1.5% rise in the 13 weeks to 3 July.
Northern Foods said it has continued to achieve “particularly good” sales growth with Tesco, Asda and Morrisons, and inflationary pressures were offset through higher selling prices.
The company’s ambient and frozen food operations made good profit progress during the first half to 2 October, but Northern said the profitability of some of its chilled operations remains unsatisfactory.
“Improving this is our highest priority, though we recognise that it will involve some risks in the current competitive climate,” the company added.
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By GlobalDataNorthern Foods said efforts to reduce costs during the first half had led to the elimination of 30 senior management positions. It also announced that as part of its focus on manufacturing efficiency it plans to close its Evesham Foods and London Road, Carlisle, factories in 2005.
“We expect trading conditions for the remainder of the year to remain extremely competitive, reflecting continuing retailer pressure and ongoing cost inflation, particularly in view of the poor UK harvest and recent increases in energy prices. Christmas trading will also be critical to our results,” the company said.
“We have put in place a number of key initiatives to raise efficiencies and reduce costs, and to ensure that we make the most of all our inherent strengths as a group. Our balance sheet remains strong and capital expenditure continues under tight control. This allows us to make further market purchases of our shares when appropriate opportunities arise,” it added.
