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Boparan says 'pursuing right strategy', despite profits drop

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Dents from retail inflation and bird flu in Europe reduced quarterly profits by over one-third at Boparan Holdings, parent of the 2 Sisters Food Group poultry-to-pizza business.

But the group's revenues sales rose by 4.8% to £821.9m for the quarter, to April 29, underlining expectations from ratings agency Moody's last week that poultry protein sales will remain "resilient".

Last week, Moody's warned that sterling weakness and higher raw material prices were likely to affect UK packaged food company profitability over the next year and a half.

"Food suppliers will need to offset the inflation through change in pack sizes, product reformulation or cost savings, because retailers are unlikely to consent to significant price increases," the credit ratings agency said.

"Rising inflation will also hit customers' disposable incomes, potentially curbing demand, though overall sales volumes will probably remain stable as food is a non-discretionary item."

However, UK poultry businesses such as 2 Sisters and Moy Park – which was put on the market last week by its beleaguered owner JBS after just two years – will be less affected by rising raw material costs than most of the food industry, said the analyst.

"Poultry volumes will remain resilient as poultry remains cheaper than other protein sources like red meat or fish."

One-off headwinds

Bhoparan, which report a 37% fall to £13.7m in operating profit for the quarter despite the rise in revenues, said that the decline was due to "one-off items", such as the outbreaks of bird flu, or avian influenza.

"Our European poultry export business in both Poland and the Netherlands has been affected by avian influenza outbreaks on the Continent," said Ranjit Singh, the 2 Sisters Food Group chief executive.

"We have experienced some restructuring costs elsewhere in the business."

Furthermore, the group has faced a boost to raw material costs from the tumble in the pound, which makes imports more expensive, while raising the sterling value of goods such as wheat traded internationally in dollars.

However, Mr Singh said that "there are clear signs in the top line performance that we are pursuing the right strategy to deliver sales and margin performance improvements".

By Jamie Day

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