McBride feels pain of rising commodity prices

A MAJOR supplier of household goods to supermarkets was yesterday braced for more price pressure after seeing profits hurt by higher commodity costs.

McBride, which makes supermarket own-label products such as laundry liquids, mouthwash and toothpaste, announced a 26 per cent decline in operating profits to £18.8m in the final half of 2010, on sales down 1 per cent to £407.9m.

The decline in operating profits was in-line with management’s expectations because of a lag period in passing on costs to customers. But shares in McBride were down as it said it expected a further £7m of cost increases in the first half of 2011.

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The company has been particularly affected by increases in the price of vegetable and palm oils, which have gone up by 20 per cent in the past year, as well as rising packaging costs.

The Manchester-based firm yesterday announced an efficiency drive, which it estimates will help shave £11m off its costs.

In the UK, which it described as a particularly weak retail environment, sales were down 2 per cent to £159m as a result of subdued demand and promotions from big branded competitors.

But it reported strong sales of laundry tablets, bleach, household cleaning products, shaving products and shower gel.

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The company is carrying out a review of its supply chain in a move which could result in factories being closed or refocused on certain product categories.

McBride has sites in Burnley, Hull, Bradford, Barrow and Middleton near Manchester as well as about a dozen bases overseas.

Its strategy review also includes focusing on growth areas such as machine dishwasher cleaning products and expanding its presence in developing economies.

Chief executive Chris Bull said: “We have delivered good results in a challenging environment of increasing raw material costs in all geographies, and weak retail markets, particularly in the UK.

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“We believe that the economic environment will cause consumers to be ever more price sensitive, and, by investing in improving our competitiveness, we expect to be able to continue to offer excellent products and value for money.”

Analysts at Panmure Gordon estimate it will take three to six months for McBride to pass the price rises on to its customers.

They reduced their operating profits forecast for the full-year by 17 per cent to £35m.