The 2 Sisters Food Group expects the horsemeat scandal to cause "considerable volume reduction" to its ready meals business, according to its latest financial results for the 13 weeks to January 26.
2 Sisters said the horsemeat crisis would cause 'considerable volume reduction' in its ready meals business during the second half
Ranjit Singh, 2 Sisters ceo, said: "We expect considerable volume reduction in our ready meals business during the second half year following media coverage of horsemeat issues, which have impacted the food industry as a whole and beef related ready meals in particular."
Singh described the firm's outlook as "cautious", as the business battled continued inflation and competitive trading conditions in a tough economic environment.
He also highlighted "the dilutive effect of our Vion acquisition ".
Vion acquisition
Panmure Gordon analyst Damian McNeela acknowledged the negative impact on the ready meals category but questioned the manufacturer's prediction of lower volumes.
"We acknowledge that the horse meat scandal has negatively impacted the ready meals category, and this is most likely to have occurred in beef ready meals," said McNeela.
"Nielsen data shows that Italian ready meals - arguably most likely to have been impacted by the horse meat scandal - declined by 13.8% in the week ending March 2.
"Overall though, according to Nielsen data, sales for ready meals in the four weeks to 2nd March 2013 declined by 0.9% with volumes declining by 2.8%."
While this represents a slow-down from the 8% value growth delivered by the category over the past year, it does not constitute a considerable reduction in volumes, added McNeela.
Operating profit
Overall group like-for-like revenues climbed by 5.4% to 597.4M with operating profit rising by 0.4M to 26.1M.
Singh said the group had delivered "a solid performance" in the second quarter, despite the tough and competitive market conditions.
"Every one of our 18,000 colleagues helped to ensure our seasonal Christmas business – which served meal occasions including ready meal accompaniments, festive sandwiches, Christmas biscuits and Christmas puddings – delivered on plan for our customers," said Singh.
"We made good progress to complete our phased recovery of higher feed costs by the end of the second quarter, but forward feed prices remain volatile."
The company repeated that its acquisition of Vion's poultry and red meat businesses completed earlier this month was "a good strategic fit to increase capacity and secure British supply."
