Asda gives up on Lofthouse: Closing meat business will cost pounds 20m

ASDA, the supermarkets group, has decided to close Lofthouse Foods, its bacon, meat pies and sausage-making subsidiary, with the loss of 1,300 jobs.

The factory, based in Wakefield, West Yorkshire, for the past 50 years, has been losing money for some time and is expected to lose about pounds 4m in the year to 1 May.

The cost of the closure will be pounds 20m to cover redundancies, fixed asset write-downs and trading losses up to the final shut-down, expected in July.

The charge will be taken as an extraordinary item in Asda's results for the year to May rather than written off against pre-tax profits. It will be set against a pounds 68m extraordinary gain on the sale of its MFI shares last year.

At the time of its pounds 347m rights issue in January Asda forecast pre-tax profits of pounds 130m, and this remains unaffected. Asda shares closed 2.25p higher at 71.75p compared with the rights subscription price of 53p.

Asda, under Archie Norman, who joined as chief executive from Kingfisher in December 1991 when the company was close to collapse, has taken an unsentimental approach to reviving the group's fortunes.

Pay freezes and a management clear-out laid the basis for a 10 per cent improvement in productivity and return to profits in the current financial year.

A spokesman for Asda said that Lofthouse had been suffering from the change in UK eating habits away from its products and chronic overcapacity in the bacon, pie and sausage manufacturing industry. Lofthouse could not produce cheaply enough and attempts to sell it had failed.

Lofthouse supplies 100 per cent of Asda's superstore requirements. On its closure more than pounds 100m of business will be up for grabs and could benefit groups like Hillsdown, whose shares rose 2p to 156p.

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