International food, service and technology group Bidcorp CEO Bernard Benson on Monday said trading conditions in the four months to October 31 had continued to be positive and were broadly in line with the performances achieved in the 2019 financial year.

During a webcast presentation on Monday, he said underlying sales had continued to grow in the independent segment with some further rebalancing of the customer mix evident in New Zealand and the UK.

During the four-month period under review, the gross margin percentage increased and overall trading margins increased slightly on a like-for-like basis, while operating costs were reasonably well-managed on a like-for-like basis, despite being impacted on by higher wage costs owing to full employment levels in numerous countries.

Food inflation, Benson added, remained “relatively benign” across most markets. He said all of Bidcorp’s businesses had shown growth, albeit some at a slower-than-expected rate.

The company’s “problem [businesses]” – Guzman, in Spain; Pier7, in Germany; and Bidfresh, in the UK – were making slow, but steady progress. These, he said on Monday, would not see their challenges resolved in the 2019 calendar year.

Other negative influences, including currency volatility, as well as political, social and civil unrest, in several geographies impacted on some of Bidcorp’s businesses, but Benson remained positive, stating that the company was “cautiously optimistic” for the full 2020 financial year results.

REGIONAL UPDATE

In Australia, the company’s performance remained solid despite weak consumer confidence and low confidence. In this region, overall revenue growth was dampened by the prior-year exit of a low-margin contract, which Benson noted still reflected on a comparative basis.

However, free trade growth in Australia was doing well, despite competitive pressures impacting on pricing.

The core foodservice businesses were doing well, with the focus on growing the penetration of the meat and liquor product lines through the network. Supply Solutions (Imports) continued to perform well off the back of further upstream integration.

Benson also mentioned that further capital expenditure (capex) had been invested in finalising the infrastructure upgrade programme.

The group’s New Zealand operations continued to deliver a solid operational performance, with “excellent progress” achieved in replacing a large low-margin contract which ended with effect from July.

Overall revenue gains were limited; however, gross margin improvements were evident from the better customer mix, said Benson.

Higher costs were being driven by labour pressures, as well as increased capacity demands with the opening of Bidcorp’s second depot in Auckland, in October. All segments of the business continued to develop profitably, with ongoing innovation and value-add product development, Benson said.

In the UK, Bidfood UK continued to perform well, with the rate of growth in line with expectations.

However, the customer fatigue from the “Brexit fiasco” was having an impact on consumer confidence and economic growth. However, sales volumes continued to grow in the independent sector as Bidcorp’s focus on customer mix and high service levels continued.

Trading in Bidfresh had been “disappointing” in the four months under review, which Benson said was primarily driven by the performance in the Produce business. Here, Seafood continued to perform well, and Meat continued to build scale against the backdrop of a weak casual dining sector and general low consumer confidence.

In Produce, the infrastructure expansion into the new additional depot and upgrade of the enterprise resource planning system hampered operational progress and profitability.

Meanwhile, in Europe, overall results from the European businesses remained solid, despite challenges in both Spain and Germany. Improved like-for-like trading profit growth in constant currency had been achieved in the Netherlands, Belgium, Czech & Slovakia, Poland, the Baltics and Italy.

Further expansion, both in terms of in-country bolt-on acquisitions and strategic entry into new geographies in Europe, remained possible, Benson confirmed.

In terms of emerging markets, South Africa was showing solid results despite a “persistently weak economic environment”, Benson said. Here, Bidfood had continued its growth trajectory and the Crown Food business had recovered post the Listeriosis crisis and was said to be achieving growth in many areas of the business.

Results from the Chipkins Puratos JV were flat as end-user customer preferences had shifted away from yeast products in plant bakeries to cheaper maize alternatives.

In South Africa, the company’s focus remains on shifting the product mix to further value-add products.

The financial performance of Bidcorp’s Greater China operations was flat against that of the 2019 financial year, with the anticipated improvements gained in mainland China having offset the unexpected declines in Hong Kong, directly attributable to the fallout from the social crisis that has unfolded.

In mainland China, trading continued to improve following the dairy crisis of the past. However, dairy remained an important category and continuing product range diversification was progressing.

Operations began at Bidcorp’s new value-add meat processing factory in the fourth quarter of the 2019 financial year; however, production ramp-up had been hampered by outstanding regulatory approvals.

Its Singapore operations had seen a positive uptick in activity levels and continued to deliver steady growth, and its operations in Malaysia performed well. Further nationwide growth opportunities were being explored.

In South America, the company’s focus remained on building a strong platform in a region with significant growth potential. In Brazil, the economy continued to be challenged and, in spite of this, Bidcorp’s business had maintained its performance, Benson reported.

Its operations in Chile were performing very well until October, when unexpected political unrest negatively impacted on this growth trajectory.

Further, businesses in the Middle East had continued to performed well, particularly in Saudi Arabia, which was buoyed by structural social and economic reforms that were translating into higher economic activity.

All other businesses, albeit small, were profitable, Benson confirmed, highlighting that new opportunities, should they be “attractive” and add value, would be explored.