The UK arm of Scandinavian food group Kavli has seen profits impacted by the loss making sale of a goats milk brand last year.
Kavli UK Limited, which runs Gateshead's Primula Cheese factory, saw pre-tax profits fall to £889,697 in 2021, from £2.3m the year before as it sold St Helen's Farm back to its founders seven years after buying it. The deal cost Kavli £1.8m and followed an animal welfare scandal at one of St Helen's main suppliers.
In new accounts, Kavli also said it had made provision for potential claims resulting from a product recall of St Helen's goats milk butter which was thought to be contaminated with metal - an issue that came to light after December's sale but occurred during Kavli ownership.
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Underlying performance was steady as the firm reported operating profit from continuing operations had risen from £3.1m to £3.9m in the year to the end of December 2021. Turnover from continuing operations rose from £36.5m to £38.4m in the same period.
Meanwhile, Kavli's squeezy cheese brand Primula, which employs 119 people at Team Valley, saw operating profits climb from £2.6m to £3m thanks to new sales and a boost from a final insurance claimed linked to a product recall in 2020.
Managing director Paul Lewney said by far the biggest challenge Kavli had faced was labour shortages, which had led to increased costs. Like many other businesses, Kavli also noted significant inflation of materials, energy and logistics costs across the year.
Mr Lewney said: "In 2021, our operations remained heavily impacted by the continued effects of the Covid-19 pandemic and also rising production costs. However, thanks to the dedication of our colleagues and loyalty of our consumers, Kavli successfully navigated this very challenging environment to deliver a solid performance. Looking forward, we anticipate 2022 will be further impacted by the strong rise in energy, raw materials and packaging and therefore the market conditions remain difficult.
"However, we were delighted to see that the Primula brand maintained strong growth into 2022 thanks to the number of incremental consumers enjoying the exciting new flavours of cheese we have launched recently. It also remains inspiring for the team to know that we continue to fulfil our mission to create value for good causes and in recent weeks we have been delighted to confirm our long term support through The Kavli Trust for a number of charities in the North East of England."
Kavli UK's profits go to the Kavli Trust which in turn distributes sums to charitable causes in the UK and overseas. The Trust recently announced a £171,000 donation to North Shields' The Cedarwood Trust, which will use the money to build a kitchen that will provide hundreds of affordable meals made in an environmentally-friendly way.
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