Global food-services group Bidcorp is stockpiling products in the UK in case of a messy divorce between Britain and the EU.
Bidcorp has set aside about 7,000 pallets of European-made food products that are not manufactured locally in the UK, said CEO Bernard Berson.
That equates to about two weeks worth of inventory, he said.
The UK has slightly more than five weeks to finalise a Brexit deal with the EU. While many analysts say that though a “hard Brexit” — where border checks are reintroduced and the UK’s future relationship with the EU is uncertain — is unlikely, the risk cannot be ignored.
If that scenario materialises, retailers are likely to face logistical hold-ups at ports and a dearth of certain products.
Berson said Bidcorp expected “a reasonable outcome to Brexit”, but said the company remained optimistic about the UK regardless. Britain, Australia, New Zealand and Europe are among its most important markets.
However, Brexit remains “a key uncertainty for the UK business”, said Dirk van Vlaanderen, investment analyst and associate portfolio manager at Kagiso Asset Management.
“A hard Brexit would likely result in significant challenges in importing product into the UK,” Van Vlaanderen said, adding that the scope for stockpiling was limited as products were perishable.
But he said Bidcorp had performed well in that market in the six months to end-December. Revenues from the UK rose 10% to R17.2bn and trading profit increased 17.9% to R857m.
Group-wide trading profits from continuing operations grew 8.3% to R3.3bn, boosted by operations in developed markets.
The results “showed the benefit of having a geographically diversified business”, said Nicholas Dakin, equity analyst at Sasfin Wealth.
“A recovery in China will be key going forward. An improvement in profitability is also important and should continue to become evident as the group exits its lower-margin businesses and contracts, and as long as costs are well contained,” Dakin said.
A poor showing in China — relating to the loss of a major dairy products agency which had accounted for 45% of volumes there — weighed on Bidcorp’s emerging-market business in the period. The company sells imported Western food products in the world’s second-biggest economy.
Berson said Bidcorp had now made up for the lost volumes relating to the agency partnership, and said the company was “in a much better position than it was before” in China, as it had a wider supplier base.
He said that overall, Bidcorp had achieved “excellent results” considering that it was contending with “unprecedented wage pressure” in many markets where there was now full employment. In some Western European markets, Bidcorp’s businesses were even struggling to fill positions.
At the same time, food price inflation had been nonexistent globally despite the effects of climate change. This could imply that the agricultural sector was becoming more efficient, he said. hedleyn@businesslive.co.za
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