One of UK’s largest food manufacturers has said it will start stockpiling against potential border delays that might be caused by Brexit.
Premier Foods, behind the brands Bisto, Lloyd Grossman and Mr Kipling, said it was preparing to increase its stocks of raw materials “in the absence of certainty” over the outcome of Brexit negotiations.
The group said it expected to spend £10m in the fourth quarter of 2018-19 on stockpiling, which may impact its plans to cut net debt by £25m a year.
In its half year results, Premier Foods said: “In the absence of certainty over the arrangements for the UK’s departure from the EU, [Premier Foods] shortly intends to start a process of building stocks of raw materials to protect the company against the risk of delays at ports.
“Potentially this action will cause an adverse movement of up to £10m in working capital during quarter four, which we would expect to reverse the following financial year as the situation normalises.”
Premier Foods’ results showed revenue for the the first half of 2018-19 was £358m, up 1.3% on the same period last year, while trading profits were £51m, up 6.2%. It’s adjusted pre-tax profits were £30.2m, up 14.3%.
Revenues were hit, the group said, by “short-term challenges” with a logistical transformation programme to centralise warehousing and distribution for its cake business.
It said the transfer of its Sweet Treats category – which includes the group’s cake business – to a third-party managed warehouse in Tamworth “did not initially achieve the required performance”, impacting on sales volumes and efficiency.
“Although good progress is now being made, with supplementary capacity now in place for the peak trading period, customer service levels are currently below the group’s usual high standards which will adversely impact Sweet Treats in the third quarter,” it said.
Premier Foods also announced it was in talks with a third party over the potential sale of its custard and rice pudding brand Ambrosia, and the group’s CEO Gavin Darby announced he would be stepping down at the end of January 2019.
☛ Want to stay up to date with the news? Sign up to our daily bulletin.