Strong recovery in earnings at Jacobs

A major restructuring and strong growth in sales of Cream Crackers, Fig Rolls and Kimberley biscuits, have boosted the fortunes of W & R Jacobs. The group, which employs 800 in Dublin, returned to profit last year. In the 12 months to the end of December last, Jacobs recorded pre-tax profits of £655,000, after showing losses of £2.7 million in the previous year.

The 1997 profits were depressed by an exceptional charge of £3.3 million incurred as part of a three-year restructuring programme at the company. The trading improvement was reflected in a 7.5 per cent increase in operating profits to £4 million last year from £3.7 million in the previous 12 months.

Managing director, Mr Bill McConnell, said that while further restructuring costs will be carried into the current year's out-turn, continued strong growth in the Irish and British market, and a restoration of margins, should secure further profit and sales growth in 1998.

Biscuit sales increased by 5 per cent over the 12 months, from £84 million to £88.5 million, mainly on the back of the continuing popularity of its brands in the Irish market. Jacobs is the leading Irish biscuit market, claiming a market share of around 50 per cent.

Throughout 1997, its brands enjoyed further growth, with one of its newest products, Jacob's Chocolate Kimberley, now among the top-selling chocolate biscuits in the Republic, accounting for around 11 per cent of sales. The plain Kimberley biscuit continues to be Jacobs biggest selling line, and is sold almost exclusively in the Irish market.

The Chocolate Kimberley has proved a more marketable product, and is selling well in the UK and also in France, according to Mr McConnell.

Jacobs has substantially improved the competitiveness of its production process over the past three years.

The restructuring programme was prompted in 1995 by trading difficulties at the company, triggered by the sustained sharp rise in the value of sterling against the Irish pound then. The programme involved the loss of 200 jobs, contracting out non-core activities, such as transport, and a substantial re-investment in the plant's production processes.

Mr McConnell said the company was now seeing the benefits of the rationalisation plan and had also channelled greater resources into marketing its main brands. W & R Jacobs is owned by the French dairy products and drinks group Danone. Through Danone, the company has been able to launch its Chocolate Kimberley biscuit product in the French market, and is now also considering entering the Dutch market.

But given the similarity in tastes in the Irish and British markets for its products, Mr McConnell stressed that it would continue to focus there.

The weakness of the value of the Irish pound against sterling has allowed the group to now recoup some of the margins lost during the currency crisis, he said, and should feed into stronger profits in the current year.