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23 January 2003
Northern Foods dives after woeful Christmas
Ingrid Mansell
The Times
January 16, 2003
NORTHERN FOODS saw almost £190 million wiped
off its stock market value yesterday as investors bemoaned another
disappointing Christmas trading period from the Hull-based food
producer.
The company reported a worse than expected 2.9
per cent drop in sales to about £400 million and a slowdown
in underlying retail sales growth to 2.5 per cent for the three
months to December 31. This compared with underlying sales growth
of 3.5 per cent in the preceding six months.
It was the second consecutive disappointing Christmas
for Northern Foods. In 2001 the group suffered from a glut of late
orders and from the inability of its factories to cope with demand.
Last year the problem appeared to be a lack of demand. particularly
for the company’s biscuits.
Jo Stewart, chief executive.said that while the
fall in total sales could be attributed primarily to the company’s
£145 million disposal of its Ski and Munch Bunch yoghurts
businesses to Nestlé last year, the slowdown in underlying
sales growth had been compounded by poor demand for the company’s
biscuits.
Mr Stewart said that the performance of the Fox’s
and Elkes brands, which account for about 12 per cent of total sales,
were particularly worrying. Sales of the two brands fell 6 per cent
compared with last time as the company lost market share to competitors
including United Biscuits, Hicks Muse, which owns the Cadbury and
Burton’s biscuit brands, Nestlé and Mars.
Mr Stewart said “intense competition”
in biscuits had also hit the company’s margins. He did not
see any relief until March at the earliest, when he expected high
chocolate prices to force biscuit manufacturers to put up their
prices. Cocoa prices attained a 17-year high last year after a disruption
to supplies from the Ivory Coast, the world’s top producer.
In its trading update, Northern Foods said that
underlying third-quarter sales to its five biggest customers —
Marks & Spencer, Tesco, J Sainsbury, Asda and Safeway —
which make up three quarters of its total sales, rose by 3.5 per
cent after a 6 per cent increase in the group’s first half,
against an 8 per cent rise for the same period the previous year.
Mr Stewart declined to comment on the effect any consolidation among
leading supermarkets would have on Northern Foods. He said it would
be “ridiculous” for him to speculate on the implications
of a tie-up between Safeway and the suitors Wm Morrison, JD Sainsbury
or Asda.
“This is a very interesting time in food
retailing, and we await developments,” he said.
Shares in Northern Foods closed 22 per cent lower
at 123p yesterday
Ingrid Mansell
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