Baxters profit plunges 96% on soaring costs

Published on 12/02/2009 20:46

BAXTERS, the iconic Scottish food group, yesterday revealed a 96 per cent slump in pre-tax profit for its past financial year.

The family-owned Baxters blamed its plummeting earnings on "one-off exceptional costs of 3.5 million" relating to sharp rises in energy costs and the poor summer of 2007, which drove up the price of its ingredients and other raw materials.

Other exceptional costs related to the refurbishment of a factory in Canada, where work ran over-budget. But Audrey Baxter, group chairman and chief executive, yesterday said "profit has recovered" in the current financial year and that the business was "performing well".

In the year to 31 May, Baxters' sales rose by 2.1 per cent to 116.4m, but pre-tax profits crashed from 6.7m in 2006-7 to just 235,000.

Baxter said: "These figures reflect what has been one of our most challenging years in recent times. Economic factors contributed significantly: we found ourselves having to absorb many unplanned cost rises as raw material prices soared due to un-seasonal weather in the summer of 2007.

"Not only did harvests around the world fail, but demand for our summer-orientated products collapsed. I am pleased to say that these factors will not be as significant in the current trading period. However, we decided to absorb all one-off costs into these results to ensure we can move forward with a positive outlook."

Baxter yesterday revealed that her group had bought Sole Mio, an Australian-based food company, towards the end of the firm's past financial year for an undisclosed sum. Expanding into Australia is expected to compliment Baxters' bases in Canada and Poland.

Last week it emerged that the group – famous for its soups and preserves – was looking to make up to 15 part- and full-time posts redundant in its retail operations and had parted company with retail director Alan Dickson.

Baxters has shops at its factory in Fochabers, in Moray, and at Edinburgh's Ocean Terminal, Blackford, Kelty and Selkirk.

Plans to open a further store have been put on hold. Baxter said: "Our retail outlets, as recently announced, have suffered like so many others in that sector, but we have addressed those issues and all stores will remain open.

"Our plans for the future are more important than dwelling on the past. As always, new product development is at the core of our business strategy."

Baxter – part of the fourth-generation of the family that runs the firm – characterised the group's balance sheet as being "extremely strong" and said she had strong support from its bank, Lloyds Banking Group.

Baxter said that the integration of CanGro Soup – the Canadian food business bought by the Scottish firm in 2007 – into the group had taken "longer than anticipated" but was now completed and a new management team was in place.

Baxters was founded by George Baxter as a small grocery shop in the village of Fochabers in 1868, with his wife, Margaret, making jams and jellies.

Soups were introduced by their son, William, and his wife, Ethel, after they took over the business in 1914.