Food giant goes into the red

Northern Foods today said it had fallen into the red as it counted the cost of its business shake-up and factory closures.

Northern Foods is the parent company of Green Isle, which manufactures Goodfella's pizzas in Naas, Co Kildare.

Northern, which makes Fox’s biscuits, Dalepak frozen foods and Goodfella’s pizzas, said it made losses of £35.9m (€51.2m) in the 26 weeks to October 2 against profits of £25.8m (€36.8m) last time.

The group attributed the deficit to a one-off operating charge of £34.8m (€49.6m) for its restructuring and the planned shutdown of two pastry plants at Evesham in Worcestershire and Carlisle, Cumbria, with the previously announced loss of 1,060 jobs.

It added that it had made a net loss of £32.1m (€45.8m) after goodwill on the sale of businesses such as its Emile Tissot frozen foodservice and Eden Vale Minsterley fresh chilled dairy products operations.

Northern, which is facing pressure from rivals amid a price war in the supermarket sector, said its markets remained extremely competitive.

It added that it faced “significant additional uncertainty” over the trading of troubled customer Marks & Spencer, which it said was making its performance in the key Christmas period particularly difficult to predict.

However, it said underlying sales in the period were up 3.4% and pre-tax profits before one-off items and losses on business disposals had risen 1.5% to £33m (€47.1m).

Chairman Peter Blackburn said: “We are confident we have the right structure and plans in place to enable Northern Foods to realise the full potential of its scale and product expertise in growing segments of the UK food market.”

Northern has reshaped itself under new chief executive Pat O'Driscoll to replace 16 operating companies with four divisions - two focused on chilled products and one each in ambient and frozen food.

The group said in September that it expected the proposed factory closures, which follows a cull of 30 senior management jobs already this year, to generate annual savings of £10m (€14.3m).

Northern said it would transfer production to its other UK plants, which have received more investment in recent years and offered greater space for expansion.

Mr Blackburn said today that the group had made real progress under Mr O’Driscoll’s leadership in establishing a firm base to realise its potential.

Performance improved in the second quarter in the wake of last year’s loss of savoury products business from Sainsbury’s and the group enjoyed particularly strong sales growth with Tesco, Asda and Morrisons.

However, trading with Marks & Spencer remained disappointing as M&S underwent major change, Northern said.

The group agreed to sell its Cavaghan & Gray seafood chilled and frozen fish business on November 3.

Mr Blackburn said: “We are already seeing real benefits from the greater clarity and accountability that the new structure was designed to create.”