Singh expects ‘strong headwinds’ for 2 Sisters in 2017

2 Sisters Food Group CEO Ranjit Singh is expecting a difficult 2017 as the combination of Brexit, currency fluctuations and retail price pressures combine to create a perfect storm. 

The news came as it reported that, in the 13 weeks to 29 October 2016, total sales were up 5.1% while like-for-like sales were up 2.4%. Its operating profit grew 11.9%.

Singh said the business was preparing to tackle “strong headwinds in 2017”. These headwinds included the EU referendum decision, currency fluctuations and price pressures in retail.

“The positive momentum we saw across the group in our last financial year continues in our quarter one results, but we expect strong headwinds in 2017 and the business is taking action now to prepare for these challenges. The market remains very difficult following the uncertainties around the UK’s decision to leave the EU. Currency-driven inflation and the price-pressured retail grocery market will make next year one of our toughest.

“Our investments will unlock cost efficiencies and help accelerate our growth programmes across the group. Running parallel with this, we are focusing strongly on a ‘cost out’ and efficiency culture throughout the organisation, with some significant benefits already delivered.”

Overall like-for-like sales in its protein division in Q1 were up 1.0% to £535.4m, compared to Q1 2015/16’s amount of £530.2m. Operating profit was down £2.6m to £6.0m.

Although the company said its expansion programme was “progressing”, this was tempered by an “aggressive cost focus” in the protein department. There is currently a consultation taking place to move a retail packing operation from a St Merryn plant in Merthyr Tydfil to Cornwall.

“Our Protein footprint programme progresses at pace and the expanded capabilities at our Scunthorpe and Derby sites will enable us to deliver more volume and extended product offerings in Added Value Protein in 2017,” said Singh. “Our Red Meat division is restructuring to improve efficiency and reduce its overhead base in order to remain competitive.

On the chilled side, like-for-like sales increased by 5.8% to £156.6m and operating profit was up 209.1% to £3.4m. Singh said this left the division “on track”.

“Investment projects in our Chilled division are on track, supplemented by major product launches for customers, including traditional British ranges and early launches of new Christmas sandwich lines.”

The company’s branded division saw like-for-like sales rise 4.9% to £105.0m and operating profit increase by 30% to £10.4m. Highlights for this division included Quality Award wins for Green Isle Foods for Steak & Bishops Finger Ale pie and a premium range of sausage rolls.

“Our brands are working hard to recover ingredients inflation; implementing further overhead restructures and targeted capital investments to drive efficiencies in Biscuits, and rolling out energy reduction and waste initiatives at our frozen sites,” said Singh.

In its outlook for the next year, it said: “The business expects strong headwinds in 2017, but is taking action now to mitigate them, particularly the impacts of inflation. Efficiency and innovation, supplemented by targeted investment, will help drive profitable sales and protect the business in a volatile operating environment. EU exit uncertainty, as well as cost pressures and the tough grocery market are likely to remain for the foreseeable future. However, we are well-placed to deliver for our customers.”

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