Northern Foods hopes for pudding boost

Tue 06 Oct, 2009 11:18

By Matt Scuffham

LONDON (Reuters) - Food manufacturer Northern Foods (NFDS.L) reported slowing sales growth on Tuesday, sending its shares down 6 percent, but said it hopes a new marketing campaign will increase demand for its Christmas puddings.

Northern Foods, maker of Goodfellas pizza and Fox's biscuits, reported a 2.9 percent increase in underlying sales in the first half to September 26 -- a slowdown from the 5.5 percent growth seen in the first quarter and reflecting a 7.5 percent decline in sales of its frozen products.

Chief Executive Stefan Barden said the biggest factor behind the slowdown was Northern Food's decision to end an agreement to supply frozen pies to Birds Eye and relaunch its own McDougall frozen pies brand instead.

"The main hit has been that we walked away from the agreement that we've had with Birds Eye. We stopped supplying Birds Eye at the end of quarter one and we're not re-supplying retailers with McDougall until quarter three," he told Reuters.

The group, which made over 19 million Christmas puddings last year making it Britain's biggest maker of the traditional dish, said it plans to launch a new marketing campaign behind its Matthew Walker pudding brand in the run up to Christmas.

The Leeds, northern England-based group, which makes branded and private-label food and ready meals for retailers as diverse as Marks & Spencer (MKS.L) and Aldi, said the closure of a pizza manufacturing site in Ireland and the ending of several own-label contracts had also affected frozen sales.

FULL-YEAR FORECAST

Despite that, Barden said he was comfortable with a consensus pretax profit forecast of 37 million pounds for the full year and forecast like-for-like sales growth in the range of 2 to 4 percent for the year as a whole.

Northern said new discount lines in sandwiches and salads were behind an 8.8 percent increase in underlying revenue in its chilled division, which accounts for around half of its sales.

However, profitability in the chilled division is being impacted by less customer promotions and slower sales volumes, the group said.

Underlying bakery revenue increased by 3.9 percent as sales of Fox's biscuits continued to benefit from a successful TV advertising campaign featuring gangster-type character "Vinnie."

Shares in Northern, which have outperformed the FTSE All-Share Food Producers Index by 5 percent since the start of the year, were down 4.6 percent to 68 pence at 11:21 a.m. They fell as low as 66.65p, their lowest in almost a month.

Analyst Nicolas Ceron at brokerage Numis downgraded the stock to "sell" from "reduce." "The group has a history of delivering strong sales growth without profits growth. It seems that when they focus on profits they find it harder to deliver the sales growth," he said.

(Editing by David Holmes)