Bottom Line: Food for thought

IF CONFIRMATION were needed that profit margins among food manufacturers and retailers are under intense pressure, Hazlewood Foods provided it yesterday. There could be worse to come.

In Britain, Hazlewood's most important area of operation, 85 per cent of sales are conducted through the large supermarkets.

Predictably, operating profit margins have been squeezed over the summer. Across the group margins fell from 8.3 to 7.7 per cent, and that is in the half-year ended 2 October - before the supermarkets locked trolleys for the latest bout of price-cutting.

Thanks to an 11 per cent increase in volumes and a little help from currencies, Hazlewood's profits advanced despite the price pressure. Ignoring a pounds 2.3m loss on a disposal, it made profits of pounds 31.3m before interest and tax, 3 per cent up on last time. Including the one-off loss pre-tax profits slipped to pounds 23.3m from pounds 24.7m.

Hazlewood is increasing its production of ready made meals, which offer some measure of premium pricing.

Full-year estimates put the shares, down 7p yesterday at 141p, on a forward multiple of a mere eight times.

It is too early to talk of share price outperformance from here. But we may be at the bottom and buyers can take comfort from the near 6 per cent yield.