A major supplier of household goods to supermarkets has said it is braced for more price pressure after seeing profits hurt by higher commodity costs.
McBride, which makes supermarket own-label products such as laundry liquids, mouthwash and toothpaste, announced a 26% decline in operating profits to £18.8 million in the final half of 2010, on sales down 1% to £407.9 million.
The decline in operating profits was in-line with management’s expectations because of a lag period in passing on costs to customers.
But shares in McBride were down 8% as it said it expected a further £7 million of cost increases in the first half of 2011.
The company has been particularly affected by increases in the price of vegetable and palm oils, which have gone up by 20% in the past year, as well as rising packaging costs.
The Manchester-based firm has announced an efficiency drive, which it estimates will help shave £11 million off its costs.
In the UK, which it described as a particularly weak retail environment, sales were down 2% to £159 million as a result of subdued demand and promotions from big branded competitors. But it reported strong sales of laundry tablets, bleach, household cleaning products, shaving products and shower gel.
The company, which has sites in Burnley, Hull, Bradford, Barrow and Middleton near Manchester as well as about a dozen bases overseas, is carrying out a review of its supply chain in a move which could result in factories being closed or refocused on certain product categories.
Its strategy review also includes focusing on growth areas such as machine dishwasher cleaning products and expanding its presence in developing economies.
Analysts at Panmure Gordon estimate it will take three to six months for McBride to pass the price rises on to its customers. They reduced their operating profits forecast for the full-year by 17% to £35 million. Their forecast for the year ending June 2012 was also reduced by 15% to £39 million.