Northern Foods Revenues Up 3.5% in Q3

15/01/08 Northern Foods has said that the trading performance in the third quarter met the Board’s expectations. Underlying revenue increased by 3.5% over the corresponding prior year quarter, reflecting average prices 3.5% higher and unchanged volumes. Third quarter operating margin improved over the corresponding prior year quarter, as a result of good progress in simplifying the business, in moving to higher added value products and through the successful recovery of commodity cost increases.

In the year to date, underlying revenue grew by 3.0%, with prices 1.8% higher and volumes up 1.2%. Group profit before tax will achieve market consensus for the full year, the company reported.

The Chilled division has continued to see strong demand, with third quarter underlying revenue growing by 5.2%.  This primarily reflected continued volume growth, up by 4.0%.  The mild autumn resulted in slower growth in Ready Meals but this was offset by a stronger revenue performance from Sandwiches & Salads.  Year to date underlying revenue for the division was 5.4% ahead.

We continue to make selective investment in additional capacity to create value.  This includes both organic expansion of Ready Meals and Sandwiches & Salads, including the current £9m investment at our Corby salads facility, and bolt-on acquisitions, such as the recently announced Ethnic Cuisine and Baxter’s chilled soup operations.

The Frozen division saw underlying revenue down 0.9% in the third quarter.  Average prices rose by 3.2%, as commodity cost inflation was recovered, leading to an anticipated reduction in volume.  Year to date underlying revenue for the division was 1.8% lower.  The recently completed acquisition of frozen pastry assets and brands is not expected to benefit the Group until the end of the current financial year.

The Bakery division enjoyed good seasonal demand in its key Christmas period.  Third quarter underlying revenue for the division was 4.2% ahead.  Average prices increased by 7.3%, including the impact of higher prices to recover commodity cost increases, while volumes were 3.1% lower.  This primarily reflected lower sales of branded biscuits, following planned reductions in promotional activity which helped improve profitability.  The Matthew Walker Christmas pudding business enjoyed strong sales, which included the successful launch of ‘The Pudding’.  Year to date underlying revenue for the division grew 3.4%.

Net debt reduced over the quarter to £213m, reflecting tightly controlled seasonal working capital, together with selective acquisition activity.  It is expected to decline further towards year-end, subject to the rate of execution of the share buyback programme announced in December 2007.  The majority of net debt continues to benefit from fixed interest rates.
 
Stefan Barden, Chief Executive, said: “We continue to make steady progress across the Group.  Our key Christmas period has been delivered effectively and to plan, and the recent successful recovery of commodity cost increases has had limited impact on sales volumes.” 

“Our operational plan continues to drive improved performance and we look to enhance this through selective, value creating, bolt-on acquisition opportunities.  Despite the continued challenging market conditions, we are confident that we will continue to make progress in realising the full potential of the business.”