Poultry price deflation hits 2 Sisters over Christmas

2 Sisters chief executive Ranjit Singh has said his business is operating in the “toughest commercial environment I have seen for many years”, with latest financials showing flat sales and profits.

Like-for-like sales, which strip out acquisitions, dispersals and exceptional items, fell some 1.3% in the three months to 31 January and adjusted operating profit 1.5%.

The fall in performance is put down to price deflation and a drop in sales volume.

See also: The UK’s chief vet dissects Avian Influenza outbreaks

Total losses after exceptional items, interest and taxation were smaller when compared with Q2 2014, at £16.7m, down from £27.4m.

One-off costs

Two events in particular were highlighted as adding exceptional cost to the operation of the business.

Outbreaks of avian influenza in Europe cost 2 Sisters £6.2m over the period in lost sales and devalued carcasses.

Restrictions to poultry movements in the Netherlands hampered intra-Europe trading and the closure of export markets in countries outside the EU devalued whole birds, according to the results.

But the cost of AI was around half that of a new IT system installed at “one of our protein sites” that required “significant improvement”.

2 Sisters estimated a £11.2m loss “due to production inefficiencies and stock write-offs” that resulted from the IT system being introduced.

Protein, the division of 2 Sisters that mostly comprises the sale of poultry, saw a 2.8% drop in sales value.

This was put down to price deflation in the UK market.

“We are currently in the process of re-engineering our UK poultry business to realise operational and cost efficiencies,” said the company.

Overall, the exceptional “one-off” items amounted to £20.7m, down from £26.3m in the same period of the previous year.

Challenging quarter

In a statement Mr Singh said: “This has been another challenging quarter for the group. Against this tough backdrop, yet again we have delivered for our customers over the key Christmas trading period.

“Given the hurdles we are currently facing, we have delivered a creditable performance and are stabilising the business.

“In our protein business, I take great pride in our continued industry-leading investment in the fight against campylobacter, but the market remains very tough.

“In addition, we have had to deal with the fall-out of avian influenza outbreaks, as well as further negative sentiment from consumers around the release of the FSA’s campylobacter figures for retailers.”