Greggs warns over Russian wheat crisis

By This Is Money
Updated: 05:20 EDT, 11 August 2010

Greggs the bakers was the latest company to warn the current Russian wheat crisis could add a few pence to the price of its pasties and sausage rolls, as grain prices soar to a two-year high.

Rising prices: Greggs the bakers may have to add a few pence to the price of their sausage rolls

The firm reported interim pretax profits rose 12.3% to £18.5m compared with a year ago.

Sales were also up 2.9% to £321m, but this was due to the chain adding 18 stores to its portfolio.

Without these new outlets, underlying sales rose a mere 0.7%. It said a further 50 to 60 stores will open by the end of the year.

The half-year dividend was hiked 5.8% to 5.5p.

Analysts have warned Greggs' share price could be hit in the short term while wheat is traded at between £152 and £170 a tonne as Russia has banned exports Greggs (down 13.5p at 420p) had forecast wheat would cost £120 a tonne.

Chief executive Ken McMeikan admitted: 'We now expect an increase in ingredient cost inflation in the second half of the year and there could be a small price increase in the products in our stores.'

He added: 'People tend to have short memories. We've been here before when wheat prices rose even more. In 2007-08 wheat was £200 a tonne.'

The chain increased its spending during the first half to £12.4m from £10.4m as it refurbished 47 shops, with a plan to refit a further 19 of its 1,437 stores across London.

In the first half of this year, the company sold 4.5m breakfast rolls since its launch in February.