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Potato quality and yield boosts Produce profits

BORDERS-based Produce Investments, the owner of integrated potato firm Greenvale AP, has cited a marked improvement in growing conditions as it hiked profits four-fold at the interim stage, while announcing plans to close a packing site in England.

AIM-listed Produce highlighted improved potato quality and yield as it hiked operating profits to £5.38 million in the 26 weeks to December 28.

Profits were more than four times higher than the £1.24m booked last year, when the industry endured its lowest yields and poorest quality crops since 1976.

The poor harvest in 2012 led to a sharp rise in potato prices, with the firm having to import produce to meet UK market requirements.

Interim results show turnover remained broadly flat, falling by 0.1% to £89.6m, as the company signalled it was on track to meet expectations for the full year. House broker Shore Capital has forecast pre-tax profits of £10.1m.

But the company said its continuing pursuit of operational efficiencies has led to a proposal to close its packing site at Tern Hill in Shropshire. The firm has entered into 45-day consultation with employees over the closure, which could lead to 190 job losses.

Chief executive Angus Armstrong said improvements made at its packing sites in Duns in the Scottish Borders and Floods Ferry in Cambridgeshire has given the opportunity to "rationalise the number of sites" the firm operates. He explained the age of the Tern Hill site meant it required "significantly" more investment than the other two.

Mr Armstrong said: "No change to how the company procures potatoes in the west of England is envisaged as a result of this potential capacity re-alignment and therefore growers will not see any adverse change.

"A significant proportion of potatoes that are currently packed at the Tern Hill site are sourced from Scotland and the east of England, so this fits with the business and customer strategy to reduce food miles."

Shore Capital said the planned closure could deliver £1m in annual cost savings, with Produce Investments stating that the job losses could be offset by creating 50 posts at the two other sites.

The company, which said the consultation would end on May 12, said it would support the transfer of Tern Hill employees to Scotland and Cambridgeshire.

Meanwhile, Produce Investments said talks were continuing over its proposed takeover of The Jersey Royal Company. The company revealed in January it had made an approach to buy the Channel Islands business, which employs 500 staff at peak times and produces 25,000 of the famed potatoes a year. It is understood to have bid £12m for the company.

Produce Investments noted the interim results featured a contribution from Rowe Farming, meaning only three months of the results were comparable with last year. Rowe was acquired in October 2012. Mr Armstrong said its integration was completed ahead of schedule.

Shares were unchanged at 235p.

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