Analysis: What caused Banham Poultry's financial troubles?
PUBLISHED: 15:38 04 October 2018 | UPDATED: 15:06 09 October 2018
Copyright: Archant 2018
Banham Poultry has been a centrepiece of East Anglia's vital poultry industry for more than 50 years - but its current problems follow a difficult period for the company.
Chief executive Martyn Bromley said the company’s decision to search for a new buyer came after “two or three bad months” during the summer when feed prices rose and trade slowed after the company invested heavily in new processing machinery at its Attleborough base.
The cost of chicken feed – a significant proportion of the cost of producing poultry – rose sharply this summer as the heatwave damaged wheat yields and forced up the price of grain.
That meant the notoriously tight margins for high-volume suppliers of meat to supermarkets – which often use cheap chicken breasts as loss leaders – were stretched further.
And for Banham Poultry, that coincided with a major programme of investment to take advantage of an expected future growth in demand, with poultry projected to become the world’s largest meat sector within a decade.
At the Norfolk Farming Conference in February, delegates were told that the company had grown to an anticipated turnover of £130m for the year ending March 2018, and had passed the production milestone of one million birds processed per week.
At the time, it expected that figure to grow to 1.4 million by September 2018, and a major upgrade programme costing “ a significant eight-figure sum” was under way to deal with the expected increased volume.
A new box freezer and refrigeration upgrade were completed in 2017, and plans were announced to increase chill capacity and install a new effluent treatment plant and a gas stunning system to improve welfare in 2018.
Lloyds Bank, which financed the investment, will now be a key voice in the decision-making process for the company sale, said Mr Bromley.
MORE: More than 1,000 Norfolk jobs at risk as Banham Poultry put up for sale
There were other, longer-term factors too. According to firm’s the most recent accounts for the 18 months to the end of March 2017, the company’s profitability had “reduced significantly ... due to sterling’s devaluation leading to higher feed and packaging prices”.
Banham Poultry, founded in 1959 and now run by the third generation of the Foulger family, is an important part of the East of England’s vital poultry industry, which contributes £648m to the region’s gross agricultural output and supplies around a quarter of the nation’s table chicken.
It is the biggest employer in Mid Norfolk, employing around 1,000 workers and supporting another 1,000 jobs throughout its supply chain, which includes a network of rearing and broiler farms.
One East Anglian farmer supplying Banham Poultry, who wanted to remain anonymous, said: “We all know how important it is for Norfolk, and for agriculture in this region, that Banham Poultry continues in some form or another. We all hope that something positive is going to happen in the next 24 hours.
“It is critical for the area at all levels, not least for bird welfare. That is our concern, but also for our employees as well.
“We are not producing nuts and bolts. We are producing and rearing a living, breathing creature. They have got to be fed and watered and they have got to continue growing, so things need to move quickly because of the livestock – and the supermarkets will still need their orders.”
MORE: ‘We will do all we can to assist’ - Pledges of support for Banham Poultry
The National Farmers’ Union (NFU) said: “The NFU cannot comment on the financial position of Banham Poultry Limited, however NFU members concerned about their contractual position with any company/buyer are encouraged to contact NFU Callfirst for free initial legal advice on their position.”