Major UK diversified food manufacturer 2 Sisters yesterday said it could take two years to complete the financial turnaround of the former Vion meat business it bought out in the spring.
The Birmingham company moved to acquire a package of Vion assets in March including a major chicken processing plant employing around 800 staff at Coupar Angus in Perthshire after the Dutch farming cooperative announced it was quitting the UK.
Clearance for the undisclosed value deal came from the Office of Fair Trading earlier this month and Boparan, 2 Sisters Food Group’s holding company, yesterday revealed their first quarterly results since the takeover.
Despite a 26.8% rise in total sales to £764.8 million in the 13 weeks to April 27, the company saw operating profits before exceptional items more than halve in the period, dropping from £31.4m in Q3 2012 to £15.5m this year.
On a like-for-like basis, sales rose by 4.5% to £624.6m, while operating profits before exceptionals fell by £11.1m to £20.3m.
In its update to the markets, the company said the Vion assets were loss-making and would dilute profit margins in the second half of the year.
It also said the effect of the horsemeat scandal on consumer appetite for ready meals would continue to hit profits, but said it expected the sector to slowly recover.
Founder and chief executive officer Ranjit Singh said: “Q3 saw the successful completion of the acquisition of Vion’s UK poultry and red meat businesses.
“This is a strategic acquisition, with around £1bn of annualised sales, capacity in poultry for future growth and serving more meal occasions.
“Whilst currently loss-making, we are confident in delivering improvement with our turnaround plan over the next two years.
“Operationally, Q3 saw good top-line sales growth with a weaker trading performance, reflecting the tough trading environment compared to a strong Q3 last year.
“As well as the dilutive effect of the Vion acquisition, we saw headwinds following the consumer reaction to horsemeat in beef related meals, alongside cost inflation and margin pressure as we invested with our customers to maintainsales growth in a highly competitive market.”
The Vion deal saw 2 Sisters which also owns the Goodfella’s pizza and Fox Biscuits brands take on around 5,500 new staff, increasing its overall workforce to around 24,000.
The Coupar Angus site adds to the presence the company has had in Tayside since it took over the former Mitchells of Letham chicken processing plant in Angus some years ago.
The company last night said it did not expect the constraints on the sector to ease in the short term.
“We expect market conditions to remain tough as we see inflation continuing, meaning consumers find cash increasingly squeezed,” the company said.
“Despite the tough environment, we believe we are taking the right actions to improve margin by addressing product and customer mix and by implementing our turnaround plan for the Vion acquisition.”