2 Sisters factory investment much needed

21-Mar-2014 - Last updated on 21-Mar-2014 at 13:48 GMT

Investment in the Cavaghan and Gray site will boost ready meal production by 10M a year

2 Sisters' multi-million pound factory investment in its Cavaghan & Gray factory will help to restore investment to the business, which had fallen to seriously low levels in recent years, said a leading analyst.

The site, which produces mashed potatoes and sauces, will grow by 743m² after 2 Sisters won significant new business for an undisclosed major customer, it announced yesterday (March 20).

“There’s been a lack of investment in the chilled side of the business over the years,” Julian Wild, head of the food team at Rollits solicitors, told FoodManufacture.co.uk. “There’s been a lack of investment in the company full stop, because Ranjit Boparan [2 Sisters' ceo] has got a lot of debt,” said Wild. 2 Sisters net debt rose by £47M to £572M this year, according to its second quarter results.

'Lack of investment'

Through making large and frequent acquisitions over the years, Boparan had neglected to invest in his current operations, Wild claimed. Retailers were looking for suppliers that were willing and able to pump money into their facilities to provide the best products, he added.

“It’s encouraging that 2 Sisters is looking to invest in the chilled side of the business; it’s a vote of confidence and there needs to be more of the same across other parts of the business. I suspect there are quite a lot of areas in the business that could do with some investment,” said Wild.

The Cavaghan & Gray site was acquired by Boparan in 2011 as part of the acquisition of Northern Foods, but had not seen much in the way of investment since, said Wild. He also believed the contract was new business, most likely from Marks & Spencers, rather than taken from another processor.

“2 Sisters has a very big chilled business, which grew with the acquisition of Northern Foods and that ought to be the area they should be investing in,” said Wild.

Encouraged to see investment

“But I’m encouraged to see investment coming through and I think it’s important that Boparan gets back on the front foot and it’s important that the retailers get behind him and support him as well. He’s got a £3bn turnover business with lots of employees,” added Wild.

Losses for 2 Sisters Food Groups' holding company, Boparan Holdings, widened to £27.5M from £12.3M a year ago, it was announced in a second quarter trading update this week (March 19).

Sales of chilled were down by 5.5%, which Wild said was not out of the ordinary for the company. “Clearly the results weren’t good, but it’s always been a difficult quarter for 2 Sisters and the results are always pretty flat [in that quarter]. I didn’t think they were as bad as they looked. But, that said, Ranjit has got a lot of challenges and has got pressure to address those,” said Wild.

Meanwhile, the new factory is scheduled to open in September and will provide 90 new jobs, as well as 20% of additional capacity to the current site. It will also be the hub for 25 new product lines and will increase 2 Sisters' ready meal volume by an extra 10M meals a year to 90M.

In January this year 2 Sisters Food Group also announced a multi-million pound investment in its added value chicken processing plant in Cambuslang, Scotland, creating up to 180 jobs in the region.