Bosses at Victor Manufacturing have described how it was simply impossible for catering equipment manufacturers to absorb increases in raw material costs in the wake of last year’s Brexit vote.
The past 18 months have seen hikes across the board as manufacturers and importers have tweaked their price lists in response to dramatic currency fluctuations.
And Victor’s annual accounts for the 12 months to 1 April 2017, published with Companies House yesterday, have laid bare the extent to which cost pressure has been heaped on the supply chain.
In their strategic report for the period, Victor’s directors said the “most significant quantifiable effect” on the Brexit vote on costs was the erosion of the value of the sterling compared to the euro and US dollar. This had the result of increasing its raw material and component prices.
“The cost of steel is driven by the value of the dollar and we saw increases during the year of between 15% and 29% depending on the grade of steel,” they revealed. “Imported components also attracted significant increases in prices and we have seen increases in the costs of these to the level of 15%.”
These levels of costs increases “could not be absorbed by the industry”, according to the directors, and the company has therefore seen most of its competitors and other catering equipment suppliers and manufacturers raise prices during the financial year.
Victor, which makes counters, hot cupboards and retail displays at its factory in Bradford, took the decision to increase its prices across the board by 3% back in January 2017.
The firm had planned for turnover growth of 13% for 2016/17, but ended up achieving a 2.5% increase to £9.09m. That meant it fell short of its £10m turnover target, but the directors described it as a “reasonable” performance given the economic circumstances.
Austerity cuts in the public sector hit the business particularly hard in the second quarter as school kitchen work tailed off, while plans to expand on its 113-strong headcount were put on hold in the second half of the year.
The net effect of the small growth in turnover, higher direct material costs and proportionally higher overheads saw operating profit more than halve to £210,395.
Net profit for the period fell from £396,375 last year to £205,224 this time around.
Looking ahead to future developments, the directors said they remain convinced that their strategic objectives for the growth of the company in future years, while maintaining financial robustness, will ensure the company’s long-term growth, profitability and financial security.