Private label contract loss hits Australia’s iconic pie maker
Patties Foods (Patties), the maker of Australia’s best known pie, Four’N Twenty, has announced a revenue increase of only 0.9 per cent for the first half of the 2014 financial year.
The Company’s results were heavily impacted by of the loss of a major supermarket private label frozen fruit contract.
Iconic brands in the Patties Foods portfolio include Four’N Twenty, Herbert Adams, Nanna’s, Patties, Creative Gourmet and Chef’s Pride. Patties manufactures and markets food products for the supermarket, petrol and convenience, catering and general foodservice channels in all parts of Australia.
Patties reported that profit margins were slightly reduced, impacted by capturing value segment growth opportunities, ‘In Home’ channel margin pressure and input cost movements. This was partially offset by improved manufacturing performance and sales price increase.
Net profit after tax of $8.755 million was down 3.3 per cent on the previous corresponding period, which equated to a 7.5 per cent reduction versus last year’s underlying net profit after tax.
“Stable revenue was achieved, whilst continuing to invest in branded growth initiatives, including innovation,” said Mark Smith, Patties Chairman. “Our disciplined focus on effective cost control meant that margins were only slightly down despite cost pressures,” he said.
Patties said ‘productivity optimisation’ remained a core focus, with particular emphasis on manufacturing efficiencies driven by capital investment and continuous improvement programs.
“Whilst conditions have been challenging, we continue to see opportunities for improvement in many areas and remain focused to deliver improved earnings,” said Michael Knaap, Patties Acting Joint CEO.
“We are continuing to grow and protect our core iconic brands and their market leading positions,” said Tim Peters, fellow Acting Joint CEO. “We have heightened our focus to innovate high quality products to create consumer demand and are excited by the plans in place for the next twelve months,” he said.
Highlights for the period
Focus on branded growth remains a priority ensuring:
Patties maintained market share leadership in all categories.
Branded growth from Patties (8 per cent) supported by product and packaging innovation and a marketing campaign.
Branded growth from Nanna’s frozen fruit (69 per cent) though innovative new product launches with high customer penetration
FOUR’N TWENTY remained as the market leading brand in both the In Home and Out of Home sales channels
The launch of a new range of Nanna’s desserts.
Completion of the robotic packing equipment project that Patties said was now delivering the full anticipated benefits.
Improved Balance sheet with conservative gearing.
Patties reported a strengthened balance sheet, which was achieved through improved gearing and a net debt to equity ratio of 46.8 per cent at 31 December 2013 (50.9 per cent at 30 June 2013). Net Debt reduced significantly by $5.2m to $62.8m (30 June 2013 $68.0m). Furthermore, Patties reported that interest cover improved to 7.0x (30 June 2013: 6.5x).
Patties said it currently anticipated in the second half of 2014 to at least match last year’s second half underlying net profit after tax as a result of:
Focus on its core brands.
The launch of innovative new products.
The price increase flow through to recover cost increases.
Disciplined control of costs.
Improved manufacturing efficiencies through the full benefits of the automation project and its