Fife’s Kettle Produce has blamed increasing depreciation costs associated with its new-build processing plant for a six-figure plunge into the red last year.
The firm a major supplier of fresh produce to UK supermarkets reported a pre-tax loss of £814,555 in the year to June 2, despite a £3.4 million increase in turnover for the period to £96.1m.
The company produces 100,000 tonnes of fresh root vegetables, greens and salad crops each year. It is one of Fife’s main employers, with an average monthly staff of 776 last year.
It suffered a major setback in April 2010 when fire destroyed its Orkie processing plant near Freuchie.
The company received a £15.17m insurance payout and spent two years reinstating damaged plant and buildings.
However, it has now pinpointed a large increase in depreciation costs associated with the new plant as a major reason behind the group reporting a loss last year.
Depreciation costs rose from £2.7m in 2011 to £4.02m last year, while the company was also faced with a jump in raw material and consumable costs which increased from £49.7m to £52.45m in 2012.
“Turnover increased by £340,000, whilst an operating profit of £81,000 became an operating loss of £564,000,” the firm’s latest accounts state.
“Depreciation has increased significantly year on year as a result of the replacement of the asset base at our Orkie site.
“This will impact our profit and loss account for a number of years, but the directors are happy to report that trading remains consistent and the EBITDA position is strong.
“It has been a year of mixed fortunes and mixed emotions.
“The weather conditions again proved challenging as the summer of 2011 was extremely wet with low light levels.
“This adversely affected crop availability and resulted in increased costs of operations.
“With the rebuild of Orkie complete, we were delighted to see Orkie return to full production capacity within our new state-of-the-art facility.”
Despite the difficulties, Kettle’s directors said they believed the company was in a strong position as it moved into the current financial year.
“The directors remain confident in the ongoing business strategies and are satisfied that our current trading targets will be met,” they wrote.
“The key business risks affecting the company relate to continued competitive pressures and product availability due to growing conditions.
“The directors are confident that, with the skills and structure we have in place, the company is in a strong position to adaptto the changing requirements of the industry.”
Kettle was also impacted by the death in May last year of chairman and founding member Clouston McIntyre.
Finance director Liz Waugh said everyone at the business was focused on building on Mr McIntyre’s legacy.
She said: “The strength and experience of our management team has ensured the business has been able to honour his legacy by continuing to meet our customers’ requirements and implement strategies to cope with the ever-changing nature of the market in the years to come.
“While there is little we can do about the weather, we work closely with our growers to mitigate the circumstances as best we can.”
business@thecourier.co.uk