Green Isle parent's stock slides 17%

Shares in Goodfella's pizzas' parent Northern Foods fell by more than 17 per cent on the London Stock Exchange yesterday following the issuing of its second profit warning of the trading year.

The UK and Irish food company owns the Green Isle group, which produces a number of frozen products under the Green Isle, Donegal Catch and Goodfella's pizza brands. It employs 20,500 people, of whom more than 1,000 are employed in the Republic.

In its statement, the group said that while it was encountering difficulties in its biscuit, pastry and chilled foods divisions, its frozen foods division was performing well.

In relation to its financial year to April 1st, 2006, the group said overall sales in the first two months of the fourth quarter had been "very disappointing with underlying sales for continuing operations unchanged on the prior year".

It said its biscuit division had been hit by the downturn in the market and that biscuit sales in January and February were 12 per cent lower than in 2005. The market has been hit by a price war amongst retailers.

The group said its chilled foods division was also experiencing volume and margin attrition. Sales of pastry products in January and February were 11 per cent lower, "reflecting changing eating habits in certain product areas," the group said. "In addition, we continue to encounter delays in securing price increases to offset major energy cost rises." It said its frozen foods division, which includes its Irish products, "has continued to perform well in very competitive trading conditions".

Northern Foods chief executive Pat O'Driscoll joined the group from Shell in 2004 with a mandate to improve the group's performance. Yesterday the group said "whilst good progress is being made in addressing the underlying structural issues in the group, this is not yet being reflected in an improving financial performance.

"The board is currently undertaking a strategic review to examine the business model, product portfolio and cost base. It will report on this review in the preliminary announcement, scheduled for May 31st, 2006."

Stock market analysts dropped their profit forecasts by up to 24 per cent following the statement to the market and speculated as to whether Ms O'Driscoll might go.

Last year, Northern had a turnover of £1.45 billion (€2.1 billion) and made a pretax profit of £80 million.