Northern Foods plc Trading Update - Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Thank you for standing by and welcome to the Northern Foods trading update conference call. (OPERATOR INSTRUCTIONS). I would now like to hand the conference over to your speaker today, Mr. Stefan Barden. Please go ahead, sir.

STEFAN BARDEN, CEO, NORTHERN FOODS PLC: Good morning everyone. Thanks very much for coming onto our call this morning.

I am here with Jez and just want to run through our trading update. This morning we released the update for the first half year to September 29, 2007. Our trading performance has continued in line with our expectations. The Group underlying revenues continued to grow at 2.6% in line with the first quarter.

The Chilled division continued to expand, growing at 5.4% year on year with revenue yields continuing to be the key driver of growth with our customers enjoying superior repeat purchase performance from our products. Despite the unseasonable summer weather, growth in Sandwiches and Salads also improved in the second quarter.

The Bakery division returned to growth with revenue up 2.8% on prior year. This reflected an initial stabilization of biscuit sales together with stronger early shipments for Christmas puddings including our new premium brand Matthew Walker pudding, The Pudding.

While Goodfella's continued to perform well, which will be supplemented in future periods by the launch of Signatore, our Goodfella's chilled pizza, underlying revenue across the Frozen division as a whole declined by 2.6% in the first half. This reflected a significant decline for our Dalepak meat grill business where the barbeque season didn't happen this year.

As a result, we are taking steps to reduce the cost base in this business. At the same time we are launching a range of grill products under the George Foreman Lean, Mean Grillers brand.

In line with our experience of the rest of the food industry, the last three months has seen a dramatic increase in commodity prices, particularly across cereals, fats, dairy and chocolate.

Year on year raw and packaging costs are expected to be 4% to 5% higher with the full year annualized effect from these increases of 8% to 10%. We have made good progress in recovering these commodity cost increases with our customers. Our steady progress continues despite challenging trading conditions.

Now Sabrina, if we can open the lines for Q&A, please?

OPERATOR: Thank you. We will now begin the question and answer session. (OPERATOR INSTRUCTIONS). Your first question comes from Mark Lynch from Goldman Sachs. Please ask your question.

MARK LYNCH, ANALYST, GOLDMAN SACHS: Good morning.

STEFAN BARDEN: Morning.

MARK LYNCH: Looking at the revenue growth and you're saying you're making good progress in recovering the in book cost increases. There doesn't seem to be much evidence of that in terms of the revenue line. And I'm just wondering when would you expect that pricing effect to come in?

And in terms of 4% to 5% you've got to recover, how much of that have you actually put through in the shops?

STEFAN BARDEN: Okay. Two parts to that question. The first is when would the pricing come through. I think we have put the pricing increases through really from the October 1 which is the beginning of our second half.

And what we have been talking to the customers about is our costs to them. We have not been talking about price rises to the consumer. And they will all decide how they manage that, themselves.

MARK LYNCH: So if we look at the margin recovery, then, should we assume that the first half we'll see some shortfalls and the second half we'll see the recovery coming through …