Farsons sees sharp drop in profit

Simonds Farsons Cisk said today that its pre-tax profit for the year ending January 31, 2009 had dropped to €895,000 from €4,146,000 in the previous year.

Group turnover amounted to €66,441,000, marginally up from the previous year.

It said profitability was most affected in the soft drinks business where substantial costs were incurred in the changeover from the returnable bottle to PET and cans. During the year under review the company inaugurated a new €25 million soft drinks packaging hall and a logistics centre.

The company said it incurred large one off costs during the initial changeover period such as large write offs of old stock, poor productivity during the initial learning phase, and impairment write downs on redundant machinery.

Group CEO Louis A. Farrugia said: “When effecting changes as fundamental as the ones that Farsons has just been undertaken, it is not unusual that the learning curve is steep and costly.”

The company cited other reasons for the results, such as substantial increases in costs of raw materials such as malt and hops, and competition from a flood of parallel traded products, at times illicit, following the liberalisation of the market.

It said it had however succeeded in reducing its cost base by employing 50 less full time equivalent employees. This initiative was ongoing and would help the group return to acceptable levels of profitability.

The board of directors is recommending a dividend of €1,000,000 and the issue of one bonus share for every six held.

The annual general meeting of the company is set for 25th June 2009.