Sugar reform continues to leave a sour taste

By Catherine Boal

- Last updated on GMT

Related tags: European union, Baking

EU sugar reform combined with unfavourable trading conditions in
the UK are continuing to hit food manufacturers hard - denting
profits and squeezing margins.

Bakery ingredients and sugar producer the Real Good Food Company (RGFC) posted its full year results today and noted that a volatile sugar market had impacted negatively on the performance of Napier Brown, its sugar division. RGFC chairman Pieter Totte said: "In sugar, the European Union market remains competitive with structural surpluses overhanging the market. The EU Commission has indicated that quota cuts will be made unless restructuring uptake increases significantly. "The slow pace of reform and subsequent market volatility has affected prices and margins throughout Europe. Napier Brown has been impacted but the strategic initiatives undertaken in a number of areas of the business will stand us in good stead for the future."​In addition to the reform, Napier Brown has seen costs rise due to an operations overhaul begun when the RGFC first acquired the business in late 2005. This year, the group incurred £1.1 million (€1.6m) in exceptional costs from the transfer of IT, finance and administration operations from Napier Brown's former site in London. However, the RGFC noted that both the impact of restructuring and sugar reform had been offset by increased efficiencies in production, particularly from new high-speed packing lines, a robot-controlled palletiser and shrink wrapper. Within the group's bakery division, disappointing results from last year have resulted in a mediocre performance. Renshaws, the baking ingredients division, is slower than expected in integrating new manufacturing processes and machinery while Hayden's Bakeries posted declining profitability thanks to excess costs attached to product launches and poor summer trading. Like many UK bakers, RGFC felt the heat of the summer weather. Totte said: "The exceptionally warm weather gave rise to operational issues at the plant, reduced consumer demand for bakery products and consequently high wastage levels." ​ Looking ahead, the company plan to increase profitability through overhead cost reductions, customer service improvements and branching out into other sectors of the food market to complement the company's bakery focus.

Related topics: Commodities, Cocoa & Sugar

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