In a trading update for the 18 weeks to January 2, 2016, the business – which supplies flour to bakeries, food manufacturers and retailers across the UK - said flooding in Cumbria had directly affected one of its major customers. This had consequently had a knock-on impact on supply of flour into that business.
“However, we carry appropriate business interruption insurance cover and therefore do not anticipate any notable financial impact as a direct result of this event,” added Carr’s in the statement.
Agriculture division
The business also said insurance would mitigate the financial impact of the storms on its agriculture division – which supplies feed supplements and fuel - after one of its associate’s feed mills had been flooded.
It added that many of its rural and agricultural customers had been directly affected by the floods.
“Cumbria in particular has faced enormous challenges as a result of the flooding following Storm Desmond,” said Carr’s CEO Tim Davies. “Despite the direct impact of the floods on some of our employees, customers and suppliers, the direct financial impact on the group is covered by insurance.”
'Solid' trading update
The trading update was described as ‘solid’ by Investec analyst Nicola Mallard.
“Despite some unexpected weather challenges, the diverse nature of the business comes to the fore again,” she said in a note. “Flour, aside from the flood led-issue, has traded to plan. There has been some margin pressure feeding back up the supply chain, but the group’s customers remain loyal and its facilities are operating well.”
Margin pressure
The business added that, as expected, margins in the bakery supply chain were under pressure from changing shopping habits and the retailers’ response to those changes.
Retail prices of standard wrapped bread have fallen sharply in UK supermarkets as retailers seek to maintain market share and combat the growth of discounters Aldi and Lidl.
“We face a number of headwinds in the markets in which we operate,” said Davies. “However, our geographic diversity, investment across our asset base, together with the acquisitions we have made, will continue to set us apart and ensure the group remains in a robust position over the medium to long term.”
Davies added that the group's “strong balance sheet” put it in a good position to take advantage of any potential acquisition opportunities.
Carr’s Group expects to issue its interim results for the 26-week period ending February 27, 2016 on April 11, 2016.