Revenue at sweet bakery manufacturer Baker & Baker’s UK operations saw a double-digit increase in 2023 but profits were dampened by rising commodity prices.
Revenue rose by 12.8% to £251.6m but gross profit and adjusted EBITDA decreased by 3.1% and 10.6%, respectively putting total gross profit at £2.6m for the year. Operating loss is ‘trending in the right direction’, however, having improved from £4.3m in 2022 to £2.8m in 2023.
Strategic price increases to offset rising costs drove the growth in revenue, a spokesperson told British Baker who also highlighted that volumes had remained stable despite HFSS legislation impacting promotional activities, “demonstrating the company’s resilience”.
“Despite a slight shortfall in EBITDA, which reached £13.2m in 2023 compared to £14.8m in 2022, this was primarily due to a timing lag between commodity price inflation and subsequent customer price increases in quarter one,” the spokesperson added. “However, the business demonstrated a strong upward profitability trajectory throughout the year, reflecting its proactive approach in managing forward commodity contracts and implementing timely price increases.”
The UK’s performance lagged behind that of the wider Baker & Baker group which reported an increase in revenue, gross profit, and adjusted EBITDA for 2023. Revenue was up 12% to €620m (£522m) while gross profit soared by 18.2% to €83.9m (£70.7m) and adjusted EBITDA (excluding non-underlying items of €11.4m) rose by 24.7% to €26.5m (£22.3m).
Baker & Baker said the ‘encouraging financial performance underlines the sustained growth of the Group since its formation as a sole bakery products business two years previously’.
Volume growth of 0.2% during the financial year represented a better-than-expected performance in light of the cost-of-living crisis and raw material inflation, and the pronounced difficulties that many of the core bakery categories experienced during 2023, the business added.
It undertook a number of structural changes to improve the performance of the Group in 2023, including investing €5m in productivity enhancements and a shift in product mix to address changing consumer preferences in the face of the cost-of-living crisis. Cost controls were also a key driver of improvement in adjusted EBITDA performance in comparison to prior year.
Among the capital projects was a £2.9m investment in its cookie capabilities at the Wirral site in north west England. The investment was designed to increase capacity and introduce new machinery to improve quality and output of the site, adding to its two existing cookie lines.
Baker & Baker also acquired its Peniche facility in Portugal that came fully online in 2023, with its iconic Pastel de Nata product complementing the business’s portfolio throughout European markets.
“Baker & Baker is a clear category leader in American sweet bakery, and our expertise and market know-how offers a key point-of-difference with customers, allowing us to drive sales throughout the retail and food service channels,” commented CEO John Lindsay. “2023 was also characterised by the cost-of-living crisis and inflation across all major food categories, and so to have maintained volume performance in the face of these market challenges represents a significant success.”
The 2023 financial performances provided an “excellent platform for further growth across the Group, and as we seek to expand into new markets in 2024”, Lindsay added.
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