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Shortbread firm sweetener as commodity costs stabilise

THE boss of Highland shortbread maker Dean's of Huntly has declared the period covered by the firm's latest accounts had been a window of opportunity to lift profits while commodity prices stabilised.

EARNING A CRUST: Dean's managing director Bill Dean is warning that renewed volatility in commodity prices is likely to hit profits.
EARNING A CRUST: Dean's managing director Bill Dean is warning that renewed volatility in commodity prices is likely to hit profits.

New accounts available at Companies House show Dean's, which markets shortbread under its own brand and supplies the private label market, lifted pre-tax profits to 66% to £729,653 in the year ended June 30, 2013.

The company saw turnover edge up by 3.1% to £7.26 million as stable butter prices allowed it to increase gross profit margin, a key indicator of business performance, by 2.9%.

However, managing director Bill Dean warned that renewed volatility in commodity prices was likely to undermine profits in its current financial year.

Mr Dean noted that prices had started to rise in the last two months of the firm's last financial year and had continued for much of its current year, peaking at almost £4000 per tonne after being as low as £2800 the year before.

He fears the most recent rises will hit its next set of accounts by as much as £200,000.

Dean's spends more on butter than any other commodity and Mr Dean argued that the volatility in its price, caused by growing global demand and limited supply, made it challenging to plan ahead.

Noting that the price had fallen back slightly in the last couple of months, Mr Dean said: "We just need a period of stability. Stability is what manufacturers and retailers need.

"If a key commodity goes up by 30-plus percent, and it is very difficult to pass the increase on in the current climate, then it has a huge impact.

"All we want is a sensible price. That allows you to plan ahead for the year and make investments. It is very difficult to plan when you have uncertainty."

He added: "The price can be anything from £2800 to nearly £4000 per tonne, which is a huge swing. How can you make plans when you have that level of volatility in the market?"

Mr Dean said stable prices last year helped Dean's lift its gross profits to unexpected levels.

The period saw the company invest "in the realms of £750,000" in a new office and refurbishing its facilities for staff.

Mr Dean lamented the fact it is not an investment that translates into new income but said it meant the firm would be easily able to take on more staff as it grew organically.

In the current year, the company is making a £300,000 investment in expanding the capacity of its visitor centre by 30%.

The project, which is scheduled to be completed by the end of May, involves improvements to its kitchen, storage facilities and front of house serving area.

Mr Dean said the largely seasonal facility, which allows visitors to observe the final stage of the shortbread-making process, attracts tourists and is well supported by the local community.

He noted: "We're fortunate that we have a lot of support for the facilities here. We have a strong local trade and we want to give them a nice experience."

Dean's employed an average of 129 staff over the period and sells its shortbread to around 30 countries. Saudi Arabia, South Korea and Japan are among the most recent markets it has entered, with exports now accounting for 7% of sales and growing.

Mr Dean said the company was holding its own in the domestic market.

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