Vion UK said losses at its Halls of Broxburn plant "unsustainable"
VION Food UK has announced plans to close its Halls of Broxburn plant in West Lothian, putting more than 1,700 jobs at risk.
The company said “it could be forced to close” what it described as a loss making site, despite four years of infrastructure investment in an “attempt to stem huge losses”.
Chairman Peter Barr said the facility was generating losses of “£79,000” a day, which he added was “clearly unsustainable”.
The bulk of those losses, according to most recent annual accounts for the 2010 financial year, was put down to “unprecedented” price rises in feed and fuel costs which could not be passed on to consumers as UK retailers had looked to increase promotions.
Vion Foods UK reported a pre-tax loss of £14.9 million for the year to December 31 2010 and a loss of £15.03 million the previous year.
Processing overcapacity was also putting further pressure on the market.
Financial results for the 2011 year to December 31 are not yet available from Companies House.
Vion Foods - part of Netherland's-based Vion NV – has today launched a 90-day consultation process with unions and workers.
Chairman Peter Barr said: “This is an extremely sad day and one we have strenuously tried to avoid for the past four years, but the huge losses being incurred mean we believe we have no alternative.
“Every possible step has been taken to secure the future of the business but we are currently losing £79,000 per day at the site, which is clearly unsustainable.
“There is significant over-capacity in the UK meat industry and market conditions are extremely challenging.”
In January 2010, Vion UK acquired six group company UK-based meat and poultry processing facilities in a £40.7 million deal.
Barr said: “If the consultation exercise does not reveal a viable way forward for this plant, a proportion of the work from these facilities will be transferred to other VION UK plants to strengthen their performance and help secure jobs.
“However, the market conditions are so severe that we will cease to supply the majority of products currently handled by this plant.
“We will make every endeavour to identify other Scottish producers who may be able to produce some of these products.
“We have today spoken to the workforce of the plant affected and have opened discussions with union representatives.”
“We have also informed Scottish Enterprise and the Scottish Government.”
Barr added: “If the plant closure is confirmed, we will take all practical steps to work with the relevant agencies to minimise the undoubtedly significant impact on jobs and local economies.
“Clearly, our Halls of Broxburn site is a major market for the Scottish pig farming industry and we would, therefore, hope to extend the timeframe for any closure plan for the abattoir at the site in order to help minimise the potential impact on Scottish pig farmers.”
Vion Foods bought the plant in 2008 from the Grampian Country Food Group, which has amassed debts of more than £300 million.
Grampian Country Food Group, then one of Scotland's largest companies, was sold to Vion in a deal thought to be worth around £400 million.
Hall’s of Broxburn currently employs 1,150 permanent and 595 agency staff at its pork processing facility, which handles 8,000 pigs a week.
Finance Secretary John Swinney will visit the site later today to meet with Vion's senior management team and staff.
Last year, Scottish Enterprise and Skils Development Scotland gave grants of £2 million to Vion to deliver a training facility of the Broxburn site, which Vion said would help to secure 1,250 jobs and create a further 250 jobs – including 100 new apprenticeships.
Rural Affairs Secretary Richard Lochhead will separately meet representatives of National Farmers Union (NFU) Scotland, Quality Meat Scotland and Scottish Pig Producers to discuss sectoral responses to today’s announcement.
Stewart Forrest, of the Union of Shop, Distributive and Allied Workers (Usdaw) described the announcement as “catastrophic news”
He said: “Our members are understandably shocked and extremely angry at the announcement.
“A 90 days consultation period will start tomorrow, but the first question we want answered is why the company has waited until this eleventh hour before engaging with its employees and their union.
“We will be examining the company’s business case for the proposed closure in detail and want to know when losses started and why so little action appears to have been taken to address them until now.
“Vion did indicate last month that the site had financial problems and as a result our members agreed to defer this years pay negotiations.
“However, Usdaw was given no indication of the true seriousness of the situation and that is extremely regrettable and in my view totally unacceptable.”
Parent company Vion EN employs more than 26,000 staff globally an generated annual revenues of Euro 8.9 billion in 2010.