Northern set to shut Asian food factory

The Leeds-based company will consult staff about a proposal to close Ethnic Cuisine in Swansea after failing to agree terms with its main customer Sainsbury's.

The company said the factory, acquired by Northern Foods in November 2007, was no longer viable.

The group said: "Mutually agreeable terms could not be reached and as a result we have reluctantly decided to terminate the existing supply business.

"Accordingly, we will be commencing consultation with employees on a proposal to close the site."

A Welsh Assembly Government spokesman said: "This is extremely disappointing and surprising news and our thoughts are with the company's employees at this worrying time.

"The Assembly Government recently offered the company a grant to upgrade facilities at the site and protect jobs, but this offer was not taken up."

Northern Foods, which also makes Goodfella's pizza and Fox's biscuits, said its 2009-10 results would include a non-cash exceptional impairment charge of about 16m as a result of the decision.

Subject to the consultation with staff, it also expects to incur a one-off cash restructuring charge of about 4m next financial year.

"The factory is described as 'struggling' in the press release so it is probably at break-even or earning a very low single digit margin," said analyst Charles Pick at FinnCap. "Its closure is further evidence that Stefan Barden, the chief executive of Northern Foods, is prepared to take a hard nosed stance."

The announcement follows the May 2009 closure of the Hull ready meals facility, which resulted in 350 job losses. Bardford-based Morrisons was the main customer.

In 2008 the group shut the Grantham ready meals facility, which

resulted in 730 job losses.