November 30, 2022

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A heavy blow to Nortura: - We are touched by the cost increase

A heavy blow to Nortura: – We are touched by the cost increase

Food manufacturer Nortura, which includes Gilde and Prior, has had a particularly difficult year so far. During the second quarter, the months from May to August, operating profit (ebit) fell from NOK 379 million last year to minus NOK 14 million this year.

Although the group increased its income from NOK 8.64 billion last year to NOK 9.25 billion this year, the remaining items in the accounts look rather bleak. Measured against the cost increases affecting Nortura, the extra millions in profits pale in comparison.

This applies in particular to electricity and energy, but also to the rest of the input factors in production from transportation to packaging. On top of that, the sharp drop in sales in the grocery segment is coming for all players, says Ann-Marit Banningstoen, CEO of Nortura for DN.

According to Nortura, higher energy costs alone drive up the group’s cost of NOK 96 million.

lost 256 million

During the pandemic, closed borders and restaurants increased the turnover of the grocery sector, but now the corona effect is over. On the other hand, in the second quarter, Nortura increased sales of merchandise to canteens, hotels and restaurants, which had to remain closed for large parts of last year.

But it is not enough to simply stop the decline, Banningstoen concludes.

The result before tax ended at minus NOK 72 million for the period, and for the year so far the loss is a whopping NOK 256 million. By comparison, the pre-tax result was NOK 294 million at the end of August 2021.

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In the report, Nortura notes, among other things, that only parts of the price increase were offset by increased price recalls. However, Panengstuen won’t answer about how much Nortura comp prices have risen in the past year.

– But basically, electricity and energy prices are the primary factor. She adds that these have increased a lot, and more than expected, since the last time we adjusted our rates.

In addition to the price increase, Nortura also cites lower production volumes in general, satisfactory absences regarding the epidemic and restrictions on chickens resulting in lower capacity utilization, as reasons for the poor outcome.

I think the prices will go up

Although Nortura notes that the cost increase is offset to some extent by higher prices, there’s no doubt that rising food prices have made headlines this fall. Nor is it surprising that food prices are rising by a staggering 12 percent per year.

Many of them are pointing fingers.

last week, mFood and Agriculture Secretary Sandra Burch (Sp) has been vehemently against grocery chainswhich it believes is raising groceries prices “too much,” specifically more than the cost increases might indicate.

While Coop’s strong purchasing director, Tor Helge Gundersen told DN he believed the suppliers could have contributed much more than they do.

– It’s not wrong that they make money, but part of the background is that many of them are actually monopolists in their category, Gundersen told DN

Negotiations are currently underway between grocery chains and suppliers, so Panengstuen will keep its cards close to its box. But she doesn’t quite agree with Gundersen.

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– In any case, I do not share the opinion that we are monopolists, because our sector is characterized by very strong competition. As for what’s going on in the negotiations with grocery chains, I don’t want to comment on this, she tells DN.

Do customers expect food prices to rise much more in the future?

– Perhaps I fear that one will have to accept rising food prices, as a result of the general increase in costs throughout the value chain. The farmer experiences increased costs, and then there are increases in transportation costs and input factors in production, so this is likely to be reflected in food prices.

take action

As a result of the grim numbers, Nortura is implementing a short-term package of measures to save between 70 and 90 million NOK this year.

According to the report, the suite of measures includes robust cost management throughout the year. In addition, the possibilities of shutting down some facilities and temporarily moving activity to more suitable energy areas are being investigated.

– Now you are announcing measures to cut costs, do you end up shutting down large parts of production?

– This is an issue that we are currently investigating, so it is still not clear what type of actions exactly will be discussed. It’s also a somewhat complicated realization because it depends on both price increases and electricity prices, but then we also have to produce what we’ve committed to our customers, Banningstoen says and adds:

But the scope of actions can be anything from shutting down a line in production for a period of time to cutting products and shutting down entire facilities.

When it comes to forecasts for the remaining months of the year, i.e. from September to December, Nortura indicates extreme uncertainty.

– Prices of several important input factors continued to rise in the third quarter after the outbreak of the war in Ukraine. There remains a great deal of uncertainty regarding how Nortura will be affected in the future, both in terms of energy price developments and security for access to critical input factors.(Conditions)Copyright Dagens Næringsliv AS and/or our suppliers. We would like you to share our cases using links that lead directly to our pages. All or part of the Content may not be copied or otherwise used with written permission or as permitted by law. For additional terms look here.