Largo set for profit despite flat sales

CRISP MAKER Largo Foods expects to make a net profit this year in spite of sales in Ireland of its leading snackfood brands – Tayto, King and Hunky Dorys – remaining flat at about €76 million.

“Our sales are up 27 per cent in the North, but in the South they’ve flat. There’s no growth,” Ray Coyle, Largo’s owner and founder, told The Irish Times yesterday. “If we can hold sales here at the level we’re currently at, I’d be happy.”

Largo’s various crisp brands currently have a market share of 47 per cent.

“We’re just trying to protect our market share as best we can,” Mr Coyle said.

Largo’s 2008 accounts, which have been seen by The Irish Times, show that, while sales rose by 4.4 per cent to €94 million last year, the company recorded an after-tax loss of €3.6 million.

The Ashbourne-based company incurred redundancy costs of €1.8 million in the year to the end of December 2008.

This related to a reduction in its headcount of 125, bringing employment levels to 550. In parallel with this, Largo invested €4.5 million in further automation of its manufacturing facilities.

Mr Coyle said the restructuring of the business last year, which also saw the company reduce raw material costs and cut wages by 5 per cent for staff and 10 per cent for management, would enable Largo to post a profit in the current financial period.

“We may reinstate it [the pay],” he said. “It depends on how things work out this year.”

Largo also booked a goodwill charge of €3.2 million last year and incurred an actuarial loss of €6.9 million relating to a defined-benefit pension scheme operated by the group. At the end of last year, Largo had a liability of €4.3 million in its pension scheme. This compared with a surplus of €2.1 million in the year to the end of December 2007.

The company recorded a fourfold increase in operating profit to €3.9 million last year but interest costs of €8.2 million pushed it into the red.

The interest charges relate largely to the group’s €62.3 million acquisition of Tayto Ltd from listed drinks group CC in September 2006.

Largo reduced bank loans and overdrafts to €74.6 million last year from €81.4 million.

In spite of the losses incurred last year, Largo made a dividend payment of €537,250. Mr Coyle received €250,000 with staff sharing the balance.

The accounts show that German company Intersnack invested €5 million in Largo in April 2009 for a 15 per cent stake in the company.

Largo sales to the rest of the world increased to €18.3 million last year from €16.7 million in 2007.

The auditors’ report prepared by Mazars includes a note on Largo’s “going concern” status. It said negotiations were “in progress” with its bankers over a breach of covenants. But the accountants did not qualify the accounts. Mr Coyle said this related to one breach of its banking covenants but said the matter has since been resolved.

“We are totally up to date with the banks,” Mr Coyle said.

Largo operates manufacturing plants in Gweedore, Co Donegal and Ashbourne, Co Meath. It also part-owns a popcorn factory in Barnsley.

It buys 10 per cent of Ireland’s national potato crop to make its crisps. Its other crisp brands include Perri and Sam Spudz.