Costs nibble into Jacob's profitability

WHILE the legendary Jim Figgerty continues to be baffled by the age old conundrum of Jacob's fig rolls, management at the Irish biscuit manufacturer is wrestling with equally fundamental problems. High operating costs militate against its ability to compete effectively, the uncompetitive position of the pound against sterling last year awarded its competitors an edge in the crucial British market and keeping pace with production technology costs money, adding another layer to the cost base.

Despite an increasing share of the domestic market, and a 40 per cent growth in exports, profit margins are being nibbled away. Getting figs into fig rolls is a doddle - the problem is how to generate sufficient profits to fund the hefty capital expenditure required to keep the company abreast of its competitors. This week Jacob announced that, while turnover increased 2.7 per cent to £83.4 million last year, operating profits fell 13 per cent to £5.6 million.

Managing director Bill McConnell says the group must rationalise to become "cleaner and fitter". A two pronged approach is being adopted. Some £25 million is earmarked for purchasing state of the art manufacturing processes but, inevitably, getting into shape will involve redundancies. Jacob, a major employer in Tallaght, hopes to reduce its 700 strong workforce by 200 over a three year period.

W&R Jacob, once a publicly listed Irish company, was taken over by the French food group Danone in 1991. Jacob was forced to dip into reserves to meet a £5 million dividend payment to its French parent, a charge in excess of its £3.5 million net profit. A perplexed Jim Figgerty, transferred from fig roll watching duties to an accountancy course, is also trying to figure this one out.