McBride to cut 400 jobs in UK

McBride, a supplier of own-label household cleaning products, is to axe a quarter of its UK workforce as the supermarket price war and tough grocery market take a toll on profits.

The Manchester-based company said it had begun a consultation about 400 redundancies at its four British manufacturing plants in an attempt to save £12m a year by 2016. The restructuring, which will affect jobs in Barrow, Middleton, Bradford and Hull, will also lead to the writedown of £21m of assets and £6m of goodwill this year.

Chief executive Chris Bull said the company faced "the most competitive period I have ever seen in the UK market", and that the cuts were aimed at helping to restore profitability at its British business, which makes up about a third of sales.

While the company supplies fast-growing discounters such as Aldi as well as the major supermarkets, those newcomers are still a relatively small part of the market and McBride's customer base.

Bull said McBride's profit margins had come under pressure as retailers cut prices. "The biggest retailers are the ones having the biggest challenges," he said. "There is weak overall demand, a weak retail environment and players are fighting for market share."

The "big four" supermarkets have all been forced into a tit-for-tat price war as they have begun to lose market share to discounters including Aldi and Lidl in the past year. The battle stepped up a gear in May when Bradford-based Morrisons said it was cutting the price of 1,200 products by an average 17% in a bid to stem falling sales.

McBride continues to see growth in other European markets – even in France, where the economy is weaker than the UK – but the combination of weak consumer demand and price competition mean sales in its home market are falling back. Full year revenues at the group are expected to decline by 3%.

"The overall retail environment is tough for most participants and there is a high degree of promotional activity particularly in our categories," Bull said.

A sustained period of big promotional campaigns by international household cleaning brands as well as cheap new brands coming into the market has hit sales of own-label washing powders, floor cleaning fluids and air fresheners.

Bull said some brands were selling for lower than half price, putting their prices on a par with retailers' own-label alternatives.

McBride plans to exit or reduce its range in some non-core unprofitable categories, such as air fresheners, Bull said.

Darren Shirley, an analyst at Shore Capital Stockbrokers, said McBride was "a company not in charge of its own destiny, sitting uncomfortably between under-pressure retailers, aggressive and promotional (grocery) branded operators and a potentially volatile crude oil price."

He said the costs of the restructuring would lead to significant losses and an increase in debts, that net debt was likely to rise to £110m by June next year – up from £60m in 2010 – while he expected sales to be flat on a constant currency basis.