McBride hit by ‘exceptional inflation’ amid H1 loss

Manchester-based household products firm McBride plc has reported “exceptional input cost inflation … driven by Covid-19 shocks to the global supply chain and rapid and exceptional inflation of key feedstocks.”

The update came as McBride said its revenues fell 10.9% to £323.4 million in the six months to December 31 and said it made a loss before tax from continuing operations of £16.8 million compared to a £13.5 million profit a year earlier.

The company’s shares fell about 4%.

McBride is one of Europe’s largest manufacturers and suppliers of private label and contract manufactured products for the domestic household and professional cleaning and hygiene markets.

McBride CEO Chris Smith said: “The group is experiencing the most extreme inflationary cost environment probably ever to hit this sector. 

“As we progress through the first part of 2022 it is encouraging that we expect the final quarter of our financial year to see our pricing actions getting closer to maturity and the business returning to close to break-even at an EBITA level and cash-flow neutral.

The outlook is of course heavily dependent on our actions to deliver the outstanding essential price increases currently in discussion with our customers, as well as other external  factors such as the development of input costs and other inflationary pressures, and continuing supply chain disruptions.

The group’s core activities remain strong and the dedication of the entire McBride team to resolve the challenges confronting us is a strong demonstration of our values and the commitment to return the group to profitability.”

On its current trading and outlook, McBride said: “Trading in the early part of 2022 has been slightly ahead of our most recent internal expectations and our current outlook is for H2 FY22 trading results to show an improvement overall compared to the first half year. 

“For the final quarter of our financial year ending 30 June 2022, we expect to see our pricing actions getting closer to maturity and the business returning close to break-even at an EBITA level before moving onto modest profits in the new financial year.

We remain focused on the delivery of our cost savings targets and are developing a series of further cost opportunities through improved efficiency and effectiveness of core business activities.

This outlook is predicated on a number of key assumptions within an extremely difficult overall trading environment. 

“Our pricing actions are still ongoing at this time across all countries, with the main focus being recovery of material input cost rises in the final quarter. 

“As with all pricing actions, we remain cautious on the risk to volumes as our customers manage the price positioning of their products in this period of exceptionally strong inflation. 

We anticipate input costs to broadly stay in line with our December 2021 estimate through to the early summer, although the outcome of current geo-political tensions, and ongoing supply and demand mismatches, could move many key commodity items either up or down in rapid order. 

“Additional cost pressures from labour costs, the impact of European haulier regulations, and energy pricing, all add to the inflation burden for the sector. 

“Supply side activities continue to present challenges, especially for lead times and availability, and our teams will continue to mitigate to ensure smooth operations across the factories and warehouses.”