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Hundreds of jobs to go at Northern Foods
NORTHERN FOODS is expected to close its Hull ready meals site as early as next month with the loss of up to 350 jobs after talks with employees ended last month.
Analysts expect Leeds-based Northern will confirm the site's closure in a half year trading update tomorrow.
Northern first proposed closing the site in July, but there were hopes that some of the 350 jobs could be saved by moving employees to another site in Grimsby. This now looks unlikely although a handful of people are expected to move across.
The closure follows the decision by Bradford-based Morrisons to move its ready meals contract to another supplier in May.
Northern indicated Hull would become loss making without a new contract to support investment in the site, with 350 jobs at risk and a 5m restructuring cost.
Northern said the ageing factory would have required significant investment to keep it going. Northern acquired the site in 1998 when it bought ready meals firm Cavaghan and Gray
The site in Brighton Street dates back to 1964 and is one of the oldest ready meals facilities in the UK. It produces mainly traditional British ready meals for Morrisons, with a small amount of volumes for Asda.
The ready meals market is only just recovering from an 18 month decline and a spate of factory closures. Instead of investing in the Hull site, Northern plans to plough money into factories with scope for expansion and more automation.
Following the closure, Northern will sever its final tie with the city where it was founded 129 years ago.
In July Northern reported strong first quarter sales, helped by good spring weather which boosted sales of salads, sandwiches and barbecue food.
Following a disappointing summer, these areas are expected to have taken a hit when the company updates the market tomorrow. However foods that do well in cooler weather, such as pizzas and ready meals, are likely to take up some of the slack.
Over April, May and June like-for-like sales rose 5.5 per cent, reflecting price increases of 1.3 per cent and volume growth of 4.2 per cent driven by its chilled and bakery divisions. Another big driver has been the move towards value products. Sales to discounters rose by 30 per cent and total value sales, ranging from Marks & Spencer's Wise Buys to Tesco's value range now make up 20 per cent of group sales.
Northern's chief executive Stefan Barden said products such as the 1 salad and 1 sandwiches for Tesco, now its biggest customer, are driving the market.
"We have seen a big swing towards value and downtrading," he said. "We have focused on simple recipes using ingredients that have not been subject to inflation. We've been working hand in hand with the retailers to produce quality products at low cost."
The group's operating profit target for the full year is 54m and pre-tax profit is 37m.
The group's chilled division saw sales rise 9.2 per cent over the three months to June 30, driven by demand for sandwiches and salads.
Bakery sales rose 6.8 per cent helped by the third advertising campaign featuring cartoon character Vinnie – a cross between a panda and a dog – for biscuit brand Fox's.
Frozen foods saw sales slide 1.5 per cent, partly owing to last year's closure of a pizza manufacturing site in Ireland. Mr Barden said the balance sheet remains strong and net debt is similar to the prior year quarter. He said that debt usually increases modestly in the summer, reflecting seasonal working capital build.
RATIONALISATION SET TO TAKE ITS TOLL
Northern Foods believes that more food manufacturing sites are likely to close over the coming years as the industry consolidates.
Northern's chief executive Stefan Barden said rationalisation across the board would mean factories will continue to close for some years.
Earlier this year Northern mothballed a plant in Lincolnshire after failing to strike a deal with Marks & Spencer.
Northern's plans for a 50m biscuit superfactory in either West Yorkshire or Staffordshire could be puton hold.
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Thursday 24 May 2012
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