McBride set to benefit from growing own-label demand

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Supermarkets are turning to own-label products in a bid to lure in shoppers, according to McBride, Europe’s biggest provider of private label household and personal care goods.

McBride’s chief executive Chris Bull said supermarkets are responding to changing shopping habits in the economic downturn.

“As people move into private label what we typically see is that once they’ve tried it, they don’t move back out of it because they see how much value it’s delivering,” said Mr Bull.

“That’s very encouraging for the future.”

McBride, which has sites in Bradford and Hull, supplies supermarkets including Leeds-based Asda and Tesco with own-label goods ranging from dishwasher tablets to deodorant.

Yesterday the group reported an expected halving of trading profit in its first half, hit by the time lag in recovering higher input costs.

But the company forecast progress in the second half, with commodity markets showing some stability and cost recovery measures taking hold.

McBride made an operating profit before one-off items of £10.3m in the six months to December 31, in line with analysts’ expectations but down from £20.2m in the previous corresponding period.

First half revenues rose two per cent at constant currency to £423.1m, with all three European divisions delivering growth.

The group said that trading since the end of December has been in line with the board’s expectations, and it expects to see continued progress for the remainder of the year.

McBride, which ended the period with net debt of £85.2m, maintained its interim dividend at 2.0p.

Analysts at Panmure Gordon said in a note: “We believe that the risk/reward profile of McBride has improved sufficiently to allow us to increase our recommendation from hold to buy.

“Given the positive underlying trends in revenues and progress being made on margins, we have increased confidence that McBride will be able to achieve our forecasts for five per cent and 29 per cent pre-tax profit growth in 2012 and 2013, respectively.”

The group’s profits were hit during the half year by the cost of restructuring the supply chain.

The company said that raw material prices have been stable since mid-2011 and it has completed its cost recovery plans.

Prices for key raw materials such as palm kernel oil and coconut oil fell sharply last year, although in other areas such as plastics for packaging, costs stayed high.

McBride typically supplies its customers on three-month contracts and faces a time lag between its raw material prices going up and renegotiating new prices.

The group believes that the consumer will increasingly look for value in difficult economic times.