Christian Salvesen set to lose E3m on peas
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ALLOWING FROZEN PEAS to defrost proved an expensive accident for Christian Salvesen, as the troubled logistics operator told shareholders that problems with its frozen vegetable business would cost it £3m this year.
The warning caused shares in the company to fall 14% to 54p as CM went to press. The setback came after a year in which the company's share price had recovered from a low of under 35p a year ago to hit 70p in February.
A spokesman says: "The vegetable business is a small part of Christian Salvesen's £60m turnover and it would be simplistic to see the £3m one-off charge as entirely due to the peas defrosting. The issue is wider, with packaging issues and product quality, all of which is now being addressed." One of the problems was believed to involve insects remaining in the packet with the
peas when they were frozen. Half the £3m is for writing-off stock which was either defrosted or otherwise unsuitable for sale; the other £1.5m is what the company calls "a re-valuation of stock to a more prudent basis".
Alastair Gunn, at Arbuthnot Securities, says the news from Salvesen did not particularly surprise him: "We have been hearing some fairly bearish noises from several companies in the sector and it is fairly obvious that the UK is getting more competitive. Food and consumer markets are particularly tough."
Gunn says one factor forcing down rates is that venture capitalists have been buying several retailers, including Selfridges: "The first thing they do is screw their suppliers down on price."
Christian Salvesen will announce its preliminary results for the year ending 31 March on 8 June.