June 1, 2006

UK's Northern Foods pares down its businesses

UK's food and meat processor Northern Foods would sell 40 percent of its business in a radical restructuring exercise.

The news follows the company's reports of a GBP5 million (US$9.3 million) loss in the year following a restructuring programme.

Despite the overall loss, the company has seen growth of 2.2 percent, with sales reaching GBP1.4 billion (US$2.6 billion) last year.

Proceeds from the sale of its businesses would be used to reduce borrowings, reduce the pension deficit and to invest for growth.

The company said that gains in its frozen food division was wiped out by weaker chilled food and bakery performances as a result of hikes in energy costs and a tough trading environment.

Profit before tax fell to GBP45.1million (US$84.1 million) compared to GBP62.2million (US$116 million) in the previous year but was within company expectations.

The company said it had also managed to derive GBP21 million (US$39.1 million) from cost savings.

The restructuring would see a simplification of the chilled food business to improve returns and reduce cost.

Northern Foods chief executive Pat O'Driscoll said the company would be refocused on fewer, higher-performing product categories that would reduce complexity while driving improved performance, earnings and cash flow.

He added that businesses to be divested would continue to impact trading performance, requiring near-term investment and restructuring to improve their competitive position. The first half of 2006-2007 would be weak, a holdover from similar conditions at the end of 2005-2006.