NWF reports interim improvement

A strong performance from animal feeds offset tough trading for the food distribution business and enabled AIM-quoted NWF to report higher interim profit. Revenues grew 16% to £203.4m in the six months to November 2010, while pre-tax profit improved from £2m to £2.2m. Net debt was 317.1m at the end of November 2010. The interim dividend is unchanged at 1p a share but the final dividend is likely to be higher than the 3.3p a share paid last year. Promotional activity by supermarkets complicated demand patterns and made them more variable for the food distribution business. This increased the cost of fulfilling orders hit the division's profit. NWF believes that it can demonstrate these increased costs and ask for higher payments. Animal feeds had a strong first half with volumes 8% ahead and operating profit trebling to £1.5m. Raw material price increases have been passed on. Fuels revenues grew but profit was flat. The £3.3m acquisition of Evesons last month will enhance this division. NWF targets a 1p/litre profit on its fuel sales. If it can generate that figure from Evesons then its profit could improve from £100,000 to £800,000. That may take two or three years, though. The second half of the year tends to generate two-thirds of profit as fuel and animal feed demand increases in the winter. House broker Charles Stanley forecasts a profit of £6.3m for the year to May 2011, down from £7.1m in 2009-10. The shortfall is mainly due to the food distribution business but fuels will also find it difficult to maintain the unusually high level of profit it achieved last year. Animal feeds is expected to improve its contribution.