Northern Foods, which makes ready-meals to sandwiches, warned yesterday that annual profits would drop after a disappointing Christmas. Its shares closed 9 per cent lower, at 149.25p.
The latest profit warning from the maker of Fox's biscuits and Goodfella's Pizzas increases pressure on its chief executive, Pat O'Driscroll, one of a few female company bosses in the FTSE 250.
Underlying sales growth slowed to 3 per cent in the third quarter from 3.4 per cent in the first half, after Northern's competitors took the gloves off in the run-up to Christmas, especially on biscuits. That forced the group to make further price promotions to defend Fox's Number 2 market share position from United Biscuits, Jacobs and Burtons. As a result, margins have suffered and are down from a year ago.
Northern said pre-tax profits would fall below last year's £62m. That led analysts at Merrill Lynch to slash their profit forecast to £56.5m from £63.8m and to warn that the group might have to cut its dividend. Analysts at Numis Securities downgraded their numbers to £60m from £65m.
Margins also suffered because the company took longer than expected to push through price increases across the board while energy costs jumped by 60 per cent. In addition, the restructuring of the chilled foods operations is yet to benefit the profit stream.
Ms O'Driscoll is merging seven different operating divisions into one, a process that began in June and will take another two years to complete.
She said sales in December alone were up 5 per cent from a year ago while October was weak due to unusually warm weather. She was confident of pushing through further price rises with retailers in the fourth quarter, which would improve margins.