The makers of popular squeezy cheese Primula say they are continuing to invest despite swinging to a loss amid increased costs and exchange rate headwinds.
The company, based on the Team Valley in Gateshead, has been making cheese products for more than 90 years and also own paté producers Castle MacLellan and St Helen’s Farm goats’ products.
The last year, however, has seen the firm tackle rising input costs which it has absorbed into the business without passing it on to its customers.
As a result, turnover dipped by 1.3% from £47m to £46.3m in 2018 and the previous year’s operating profit of £1.7m was converted to an operating loss of £529,804.
The 2017 pre-tax profit of £1.88m also fell to a loss of £290,942.
Employee numbers remained stable, at an average of 272 compared to the previous year’s 273.
In a report accompanying the accounts, managing director Paul Lewney said: “The group’s turnover has decreased by 1% and profit before taxation has decreased to a loss before taxation of £290,942 (2017: £1.88m).
“The group has experienced significantly higher input costs in the year that it has not been able to pass on to its customers. The directors have plans in place to improve the group’s profitability and financial position in 2019.
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“Competitive pressure in the United Kingdom is a continuing risk for the group, which could result in it losing sales to its key competitors. The group manages this risk by providing value-added services to its customers, having fast response times in supplying products, new product development, and by maintaining strong relationships with its customers.”
The accounts detail how the firm negotiates forward purchase contracts for its raw materials where it can, and that the imminent departure from the EU represents a “heightened risk”, so it is identifying alternative supplies for all its “EU inputs”.
During the year it continued to invest in research and development, leading to updates to existing products and some new launches.
Kavli’s unique business model typically sees it plough profits into a charitable trust which was set up in the 1960s by the parent firm Kavli Group, whose sole purpose has been to generate profits for good causes through its commercial businesses.
After taking away investment needs for the commercial firms, all remaining profits are fed into the Kavli Trust, which then decides how to use the money on a local and worldwide basis.
Following the publication of the accounts, Mr Lewney said: “Despite the many challenges facing the food manufacturing industry over the last 12 months, Kavli continues to deliver outstanding products to consumers through its three leading brands – Primula, St Helen’s Farm and Castle MacLellan.
“In 2018, we were faced with significantly increased raw material costs and unfavourable exchange rate movements for buying raw materials and packaging which contributed to a slight loss.
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“However, moving into 2019 we’ve continued to invest into our business, and have continued to provide great service, quality, and product innovation which stands us in good stead for the future.
“We’re delighted that as we continue to deliver and develop, we can support research, culture and humanitarian work both locally and across the globe through our involvement with the Kavli Trust. “This is our driving force and makes each and every one of our Kavli colleagues more determined and dedicated to delivering strong results in order to generate more value for good causes.”