Ranjit Boparan, 2 Sisters’ ceo, said: “We expect considerable volume reduction in our ready meals business during the second half of the year following media coverage of horsemeat issues, which have impacted the food industry as a whole and beef-related ready meals in particular.”
Boparan described the firm’s outlook as “cautious”, as the business battled continued inflation and competitive trading conditions in a tough economic environment.
He also highlighted “the dilutive effect of our Vion acquisition”.
Vion acquisition
Panmure Gordon analyst Damian McNeela acknowledged the negative impact on the ready-meal category but questioned the manufacturer’s prediction of lower volumes.
“We acknowledge that the horsemeat scandal has negatively impacted the ready-meal category, and this is most likely to have occurred in beef ready meals,” said McNeela.
“Nielsen data shows that Italian ready meals – arguably most likely to have been impacted by the horsemeat scandal – declined by 13.8% in the week ending March 2.
“Overall though, according to Nielsen data, sales for ready meals in the four weeks to March 2 2013 declined by 0.9% with volumes declining by 2.8%.”
While this represents a slowdown from the 8% value growth delivered by the category over the past year, it does not constitute a considerable reduction in volumes, added McNeela.
Operating profit
Overall group like-for-like revenues climbed by 5.4% to £597.4M with operating profit rising by £0.4M to £26.1M.
Boparan said the group had delivered “a solid performance” in the second quarter, despite the tough and competitive market conditions.
“Every one of our 18,000 colleagues helped to ensure our seasonal Christmas business – which served meal occasions including ready-meal accompaniments, festive sandwiches, Christmas biscuits and Christmas puddings – delivered on plan for our customers,” said Boparan.
“We made good progress to complete our phased recovery of higher feed costs by the end of the second quarter, but forward feed prices remain volatile.”
The company reiterated that its acquisition of Vion’s poultry and red meat businesses completed earlier this month was “a good strategic fit to increase capacity and secure British supply”.
2 Sisters Q2 results – at a glance
- Total sales: £626.5M, up by 9.6%
- Like-for-like sales: £597.4M, up by 5.4%
- Operating profit: £26.1M, up by £0.4M
- Net debt: £524.5M, down by£106.3M.
Source: 2 Sisters