HIGHER profit contributions from the Green Isle frozen fish to pizza business at Naas, and increased profits earned at Batchelors in Ireland helped to lift first half profits at the Northern Foods group chaired by Irishman, Mr Chris Haskins.
Growth in the Irish profit contributions played a significant part in offsetting further downward pressure on dairy profitability and lower profits earned on meat products hit by the BSE crisis.
Overall, first half profits before tax and exceptional items edged forward £600,000 to £57.8 million on turnover down £27 million at £967 million, partly reflecting cutbacks and disposals as part of the group's retrenchment programme.
Operating profits earned on grocery products including Green Isle and Batchelors soared 60 per cent to £16.2 million on turnover up 36 per cent at £179 million. Control of the Green Isle business was acquired in June 1995 when Northern paid £24.7 million to buy a further 43 per cent interest, lifting its stake to 79 per cent.
The group's interim figures were therefore flattered by the inclusion of Green Isle as a subsidiary throughout the six month period, compared with only two months in 1995. Green Isle is continuing to build sales of its Goodfellas pizzas in the UK where it has nearly one quarter of the deep pan branded pizza market.
Green Isle's own label pizza business with major retailers is also expanding, said Mr Joe Stewart, managing director of Northern Foods' prepared foods division. "The continuing success of Green Isle's branded and own label pizzas, pastry product and fish businesses in Ireland also contributed to an excellent performance," he said.
Strong growth in the Green Isle business has prompted the Northern Foods board to sanction "significant" investment in expanding output at its factories at Naas, Portumna and Boyle.
In addition, Mr Stewart said that the Batchelors business in Ireland, widely known for its "Barney and Beanie" baked beans, "again increased its profits an ever competitive market environment."
Overall, the prepared foods businesses at Northern Foods increased operating profits 24 per cent to £43 million on sales up 90 per cent at £538 million. The increased profits were achieved despite a £3 million reduction in profits earned on beef based pies hit by the BSE crisis.
In contrast to growth in prepared foods profits, dairy operating profits fell 27 per cent to £22 million on turnover down 13 per cent at £403 million. The decline in dairy profitability, despite extensive cost cutting measures, mainly reflected the sharp deterioration in dairy commodity markets.
In Northern Ireland, though, the group's dairy business improved its performance against the backdrop of lower raw material prices. But ice cream profits were lower compared with the exceptional summer of 1995.
Against the backdrop of improved interest cover at 9.4 times and gearing down from 65 per cent to 52 per cent, Mr Haskins is cautiously optimistic about Northern Foods' future.
Prepared Foods is treading strongly, based on growing demand with the major retailers and both our businesses are benefiting from the reduction in their cost base through restructuring," he said.
"The dairy business continues to be affected by the decline in commodity markets compared with a period of exceptionally high prices last year.
"We feel that the group is performing well in the light of the BSE and dairy commodity issues and we are satisfied that our strategies are sound and appropriate for the future.
The interim dividend is up 2.9 per cent at 3.6 pence per share.
