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Finsbury Food confirms closure of loss-making Grain D'Or factory

Fri, 6th Oct 2017 09:14

(ShareCast News) - Finsbury Food confirmed on Friday that it will close its loss-making Grain D'Or factory by 2 December.

The company said the move means it will benefit from not supporting the losses associated with the factory and fits in with its strategy of focusing investment on profitable product niches to drive long-term market growth and value in the specialty bakery.

Grain D'Or - which has been historically loss-making - reported an operating loss of 3.3m on revenues of 28.5m for the year to the end of June. Finsbury said that due to the products it makes, it trades in a "particularly competitive environment" which creates strong competition for contracts and loss-leading pricing.

In addition, the factory has lost two large contracts since the year-end, weighing on its financial performance even further. Finsbury reckons the exceptional cash costs associated with the closure could reach up to 10m, spread over up to seven years, although they're more likely to be in the region of 6m.

The company reiterated its expectations for the year to the end of June 2018, adding that the adjusted profit performance will be achieved from a lower base due to the temporary increase in butter prices, which should recede in subsequent financial years.

"Finsbury's recent statements for the full year to June 2017 demonstrated its resilience in a challenging market. This robust result was achieved thanks to the significant investment it has delivered over the past four years. Following the closure, the company's lower cost base and greater focus on profitable markets means that it is well positioned for future growth, despite current market conditions, and to benefit from any future upturn in the market.

"The company will continue to invest in support of its strategy to drive efficiency and profitable scale and is confident that it is well-placed to maintain its leading position in the market."

At 0910 BST, the shares were down 2.3% to 106p.

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