Trump and hurricanes lift profits at Baxters
SCOTS food manufacturer Baxters has reported a jump in profits as its US business, which now accounts for about two-thirds of sales, benefited from President Donald Trump’s defence policy and the supply of emergency meals amid a severe 2017 hurricane season.
Operating profit before exceptional costs was £24.1 million, up 24 per cent, while the pre-tax profit has increased from £8.8m to £15.1m.
Including exceptional costs connected to restructuring and its Australian operation where two plants were merged, Baxters has moved to a £7.33m pre-tax profit in the year to March from a loss of £675,000 in the prior 12 months.
Group revenue increased by 14% to £338.3m and in the US revenues rose to $259.2m against $207.7m, up 25% and now accounting for approximately 60% of group total revenue.
Audrey Baxter, executive chairman, said the company has been bolstered by diversification into the US market after the £87.4m 2014 acquisition of Ohiobased Wornick, which provides military rations, added to its product range that also includes soups, pickles, jams and Fray Bentos pies.
Ms Baxter said the firm has had increased contracts under Mr Trump’s administration, while Europe – the firm also has a Polish operation – was “more stable” as executives keep one eye on Brexit, its Canada operation was sold for a gain of £7.3m, and Australia provided challenges.
With about 1,500 staff globally, the company has its historic manufacturing operation at Fochabers in Moray, where it employs most of its 500 Scottishbased staff. It moved into its corporate head office in Edinburgh a year ago.
Ms Baxter said: “We’ve put in a good set of results last year and we are feeling very good about that.
“We sold our Canadian business and that was a real classic acquire, grow and exit at a good value, and with that exit we have been able to make our balance sheet much more robust.
“I don’t think anyone is jumping up and down in the UK or Scottish economy until Brexit is sorted, and until we get more clarity and certainty about where we are going and until that is resolved I think that businesses are nervous and we are not different to anyone else.”
She added: “Entering America was a clear strategic intent and plan we interrogated for about four years before we found Wornick’s. And subsequent to that two things have happened that have significantly changed the fortunes of Wornick’s.
“One is the economy has changed significantly under the guidance of the Trump administration and also the Trump administration has invested heavily into defence. We certainly have seen our contracts rise.
“Unfortunately, because of the hurricane season the [stock of] emergency rations contracted hugely at Federal Emergency Management Agencylast year so we also benefited from an additional contract to build back up the stocks for emergency rations because the defence contract uses the same contract, uses the same rations for the armed forces as for emergency rations.”
The uncertainty of Brexit is also impacting the firm’s plans and Ms Baxter said agri-business is already affecting costs for manufacturers.
She said: “Something as simple as the cost of potatoes, it used to be you would worry about the seasonality of it, has it been a good or bad season, now there is all the impact of Brexit and it is being priced in.
“We are seeing already a big upward move in input prices on certain ingredients, not everything, but on certain ingredients.
“Once an upward move in price has been established it is very difficult to shift it down.
“It is not happening for the actual manufacturers because our output prices are squeezed by the retailers, the multiples.”