2 Sisters suffers double digit decline in profits as inflationary headwinds buffer food firms

Boparan Holdings Limited, the parent company for 2 Sisters Food Group, has announced its consolidated results for the 13 weeks ended 28 January 2017. 

The results show that while like-for-like sales rose 2.6% during the quarter to £812.8 million, like-for-like operating profit declined 17.8% to £18 million.

The company said this performance was in line with expectations and there were “expected headwinds affecting overall margin performance in the short-term.” It said its efficiency and cost-reduction programmes would be “accelerated to counter inflationary and currency pressures” and it said strong foundations were being laid “through innovation and investment streams”.

Ranjit Singh, 2 Sisters Food Group CEO, said: “Our results reflect the very tough trading environment we face. The market is as competitive as ever and currency fluctuations have brought about higher input prices. It is unsurprising that this has put a margin squeeze on a lot of businesses, including our own.

“However, there is underlying positive momentum across the business, as we have seen over the past four trading quarters. Sales are rising, and we are well positioned to grow with our customers in new markets.

“Competing in our markets requires investment for the long-term, so our supply chain is efficient, sustainable and fit for the future. This has been our approach when making investment decisions, and we are still focusing strongly on a ‘cost out’ and efficiency culture.

“Our Protein footprint programme progresses at pace. We are proud of the substantial upgrade to our facility in Scunthorpe, making it one of the largest and most advanced in Europe. Also we progress with our restructuring at other poultry locations, and we have now completed a similar exercise in our Red Meat business.

“Investment projects in our Chilled division at a number of sites, have improved quality and efficiency and the merger of functions across the division will bring substantial annualised savings.

“Our Brands have been more acutely affected by ingredient inflation. However, both Frozen and Biscuits have seen robust sales figures with new contract wins and, like the rest of the business, both have implemented major efficiency drives.

“We have seen an increased outbreak of Avian Influenza this year however our strict biosecurity measures have limited the impact on our agriculture although the outbreaks have caused the temporary closure of some overseas markets.

“The market will remain challenging, but as we continue to create a good environment for the long-term sustainability of the business, remain resilient and deliver for customers, our Better Before Bigger strategy will achieve our long-term ambitions.”

Q2 2016-17 Q2 2015-164 Y-o-Y Change 
Total sales £833.0m £792.0m 5.2%
LFL sales1 £812.8m £792.0m 2.6%
Operating profit2 £19.4m £21.9m -11.4%
Operating profit margin % 2.3% 2.8% -50bps
LFL operating profit1,2 £18.0m £21.9m -17.8%
LFL operating profit margin % 2.2% 2.8% -60bps
Profit after exceptional items, before interest and tax £12.3m £20.1m (£7.8m)
Retained (loss) / profit after exceptional items, interest & tax (£2.5m) £1.7m (£4.2m)
Net Debt £763.2m £687.4m £75.8m
LTM Adjusted EBITDA3 £175.6m £169.6m £6.0m
Net Debt: LTM Adjusted EBITDA3 4.35 x 4.05 x (0.3) x

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