Matthews in a flap as profits slump

BERNARD MATTHEWS, the turkey and meat production company, saw its pre-tax profits drop by around a fifth over 2006, according to the group's latest set of accounts.

And the company expects to take another financial blow this year, it said, following the outbreak of bird flu earlier this year.

Over the year to December 31, Matthews saw pre-tax profit slide to £19.9 million, from £24.37m the year before.

Total sales from also took a hit, dropping 12 per cent to £422.39m against £479.93m in 2005.

"The reduction in sales was primarily as a result of a reduction in agricultural output in the UK," the company's directors wrote in the report accompanying the latest financials.

Western Europe continued to be the company's biggest market, where sales dropped to £317.8m, from £356.1m before.

Europe's biggest turkey farmer also blamed trading conditions for a reduction in group operating margin.

Matthews gave no indication of what could be expected over the year in terms of profitability and sales, but it admitted that the outbreak of bird flu in February had added to trading woes.

"An outbreak of avian influenza in February 2007 further compounded the difficult trading conditions which will be reflected in the results for 2007," the company said.

On February 2, Matthews' farm at Holton, in Suffolk, was struck by an outbreak of the potentially fatal H5N1 strain of bird flu.

Although the disease was only found in a small number of turkeys, it led to the slaughter of 160,000 birds.

The company's UK chief executive Bart Dalla Mura said that the group - which produces seven million birds a year from its 56 farms - had been compensated for the cost of the birds that had not been carrying the disease when slaughtered.

And although the company, which employs more than 6600 staff, was not prosecuted over any alleged bio-security slip-ups, Mr Dalla Mura said: "However, public perception led to a significant decline in sales for the first half of the 2007 financial period."

Mr Dalla Mura had been appointed in March 2006 to help the company battle back from a series of blows, which included a row over the fat content of its Turkey Twizzlers and cruelty allegations. But last month he quit the group, which was founded with 20 turkey eggs and a second-hand incubator by the eponymous Bernard Matthews in 1950.

The poultry industry suffered another hit earlier this month when bird flu was confirmed in a flock of turkeys that were set for Christmas tables at another farm, owned by Gessingham Foods, on the border of Norfolk and Suffolk. Since then there have been other reported outbreaks in the region.

Around 68,000 birds are to be culled in the latest outbreak as the Government and farmers try to combat the disease.

Since the end of the reporting period, the group has also completed the sale of its operations in New Zealand.