LONDON (Alliance News) - Shares in The Real Good Food Company PLC dropped 25% on Friday after the baker and sugar producer again warned of challenges facing its sugar business and said it was in a pricing dispute with the sugar subsidiary of Associated British Foods PLC.
In a statement, the company said it is unlikely that the pricing dispute with British Sugar will be resolved in the near future, and it will hit earnings both this year and next year.
British Sugar is a major supplier to The Real Good Food Company's Napier Brown non-refining sugar distribution business.
"There are no current negotiations with British Sugar and it is therefore unlikely that this pricing dispute will be resolved in the near future. The short term impact on Napier Brown's and Garrett Ingredients' results of this action by British Sugar is significant," the company said in a statement, adding that it will "inevitably be reflected in the group's full year results for the year to 31 March 2014 and in the following financial year.
Real Good Food said that earlier this month British Sugar temporarily withdrew the supply of sugar to Napier Brown despite Napier Brown continuing to pay over 95% of the imposed price while it sought a solution to the pricing dispute.
"Given that BS has a monopoly in the supply of UK beet sugar, Napier Brown had no alternative but to pay the imposed price under duress in order to maintain supply to its customers," it said.
"This approach by British Sugar is, in Napier Brown's view, in breach of undertakings given by British Sugar to the EU Competition Authorities in 1988," it added.
The group said it has now made a complaint to the Office of Fair Trading alleging an abuse of a dominant position by British Sugar, and if successful Associated British Foods could face a substantial fine. It said the complaint has been referred to the new Competition and Markets Authority, which begins operating on April 1.
Associated British Foods declined to comment on the dispute.
Real Good Food saw nearly a quarter of its market value wiped out early Friday, as its shares tumbled 24.8% to 47.00 pence per share. Associated British Foods shares were up 0.5% at 2,983.00 pence.
By Rowena Harris-Doughty; rowenaharrisdoughty@alliancenews.com; @rharrisdoughty
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