Rising price of butter deflates profits at baker
FINSBURY Food Group profits tumbled 66% as the company contended with “unprecedented” inflation and the closure of its loss-making pastry factory.
The cake and bread manufacturer, which has it headquarters in Cardiff where it employs around 1,000 reported a drop in annual pre-tax profits to £4.5m in the year to June 30, while group revenue fell 3.4% to £303.6 million.
The company said it was hit by “significant one-off closure costs” after shuttering its loss-making Grain D’Or factory last autumn.
Excluding the closure, revenue was up 2.4% at £290.2m while pretax profit rose 4% to £17.2m.
Finsbury said it was a “resilient performance” given the ”volatile” retail market and “unprecedented inflationary environment”.
The company said it had to contend with a notable cost inflation of ingredients, including butter, which compounded pains at the now closed Grain D’Or operations.
“The escalating butter price triple what it was just a few years ago - ultimately led to uncompetitive pricing, lost contracts and widening financial losses at our London bakery, Grain D’Or,” Finsbury chief executive John Duffy said.
“With the losses caused by the butter increase, we had to change our commercial plans. This precipitated the difficult decision to close the business in the first half, following extensive employee consultation.”
The closure last autumn resulted in the loss of around 250 jobs.
“All in all, it was a necessary step back to take stronger steps forward”, he added.
Finsbury said it benefited from new product launches including its own “free from” bakery line in Europe, called Wiso, as well as a Mary Berry cake brand.
It invested around £12.6 million in its own operations, in line with last year, bringing its total capital spend to £50.8m over the last five years.
Those funds were aimed at projects including a new IT platform that has helped the company understand “labour and waste cost by product”, as part of a wider efficiency drive across its manufacturing operations.
It also poured £8 million into a new cake line at its Cardiff bakery which is now running seven days a week.
Mr Duffy said: “The relentless investment and efficiency focus of recent years has enabled us to not only cope with this market environment but also maintain our margin.
“At the same time, we have also ensured we are not over-dependent on any one customer or product area.
“The true measure of success is that we have achieved underlying growth ahead of our market and have demonstrated the growth available from premium, healthy and authentic on-trend innovation.”
Finsbury said it is now exploring further acquisitions, but expects organic growth to be “steady”, which the chief executive said “is no bad thing in the market we’re in.
“But the desire remains to be a strong competitor within our bakery markets.”