The closure of 2 Sisters Food Group’s West Bromwich plant following undercover filming by The Guardian and ITV slashed profits during the first quarter, the firm’s latest financial results have revealed.
Operating profit during the 13 weeks ending 28 October in 2 Sisters’ protein division was down £4.9 million to £1.2 million compared to quarter one in 2016, when the figure was £6.1 million. This was ‘driven primarily by the temporary suspension of operations at Site D’, which closed for a month for staff retraining during October.
However, like-for-like sales in the protein division were up 3.7% at £578.8 million from £558.4 million during the same period in 2016.
‘This quarter, the UK poultry business has benefitted from strong volume growth underpinned by the substantial upgrade of our facility in Scunthorpe. Cost reduction exercises in our red meat business are now delivering and we have begun to recover some of the commodity inflation impacts seen in the previous quarters,’ the firm said.
‘However, this has been more than offset by further inflation in other areas and the impact of the temporary Site D suspension.’
Ranjit Singh, 2 Sisters Food Group CEO, said: “Despite the tough market environment, we have grown revenues during the first quarter and have worked hard to deliver for customers.
“As well as commodity inflation, our results have also been affected by the temporary suspension of operations at our poultry cutting plant (Site D). We are taking action now to improve margin performance and we should see the results of this coming through in the second half of the year, as we work through our plans to strengthen our business in all areas.
“As confirmed in our Q4 announcement, following a comprehensive colleague retraining programme, the site recommenced supply to the majority of customers on 6 November. In addition, the FSA are now a permanent presence on site, and work on extending CCTV coverage and its continual monitoring is now well underway.
“Despite progress with price recovery and efficiency programmes, higher commodity prices and continued disruption following the suspension of production at Site D are proving difficult to mitigate in the short term. However, we remain cautiously optimistic that our change programme, coupled with a degree of softening in commodity prices will improve our position as we head into the second half of the year.
“We re-emphasise our position that our core businesses operate in attractive, growing markets and our broad reach means we can benefit from operational and commercial efficiencies. Our commitment to producing safe and quality food remains at the heart of the business, as does our determination to deliver a stronger overall position as the financial year progresses.”