Winning recipe for turnover but Walkers’ profits remain static

The rising price of ingredients took a bite out of profits at Walkers Shortbread last year despite the continued growth of its tartan-branded confectionery which has seen it reach record staffing levels.

Aberlour-based Walkers managed to grow turnover by 12.1 per cent, to £119m in 2011. It said the positive trend continued this year, with high-profile British events such as the London Olympics giving it a small boost.

The family-owned firm said it is currently at its manufacturing peak as it produces shortbreads, biscuits, cakes, oatcakes and meringues for the Christmas market.

Its headcount recently passed the 1,600 mark, marking an all-time high for the 114-year-old business. In 2011, the average number of employees was 1,300, up from 1,220 in the year before.

The firm said the increase reflected “the ongoing development of the Walkers brand, the introduction of innovative products for use by our private label business partners, and the strength of our customer relationships more generally”.

The company makes biscuits for Duchy Originals – the brand set up by Prince Charles to use ingredients grown on his Highgrove estate – and products for diet management company WeightWatchers. Supermarket chains Sainsbury’s and Waitrose are also customers.

However, the growth in sales and production has so far failed to translate into higher profits as margins fell in the face of basic food price inflation. Last year pre-tax profits were unchanged at £8.9m as margins crumbled from 8.5 per cent to 7.2 per cent. Margins had stood at 9.9 per cent in 2009, and a fall in profits in 2010 was also blamed on rising flour prices and other raw material costs.

The firm said there has been “some respite in commodity prices” in recent months, which will help its margins for the current year. But it added: “Prices are once again increasing, with, for example, dramatic rises expected imminently in the price of flour, and this is likely to continue into 2013.”

Walkers, which exports its products to 80 countries and trades strongly on its distinctly Scottish labelling, said its brands had increased sales both in the UK and abroad. The proportion of its revenues coming from overseas held steady last year at about 41 per cent.

Australia, Canada and the United States have always been important markets for the firm. It is also making inroads into China and Japan.

The firm said it was satisfied with its rate of growth since the year end, despite the recession at home at the difficulties experienced in many of its export markets.

It said that the “high-profile cultural and sporting events” hosted by the UK this year had “a marginally beneficial effect” on Walkers branded sales. Its products are strongly associated with Britain in some countries.

It is also pressing ahead with its policy of capital investment, and recently began work on a 3,500sq m factory at its site in Aberlour. Once completed, it will give the company increased production capacity in a number of products.