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April 1, 2015

UPDATE - Real Good Food in talks over sugar distributor's future

Sugar and ingredients firm The Real Good Food Company (LON:RGD) is in talks over a potential transaction for its Napier Brown sugar business to stabilise future earnings and strengthen the balance sheet but said the rest of the group has performed better than expected.

Reductions in EU sugar market prices are continuing to make trading difficult for both UK sugar distributor Napier Brown and Garrett Ingredients.

Napier has returned to profit after a dismal first half but is still below expectations for the year, the firm revealed.

European sugar prices have been driven lower by increased competition as other firms sought to establish new market positions ahead of the removal of EU sugar quotas in 2017.

Real Good Food has also, it revealed, incurred significant one-off transaction costs as well as legal costs in relation to the discussions with the UK and EU Competition Authorities.

As reported last September, the group's complaint against British Sugar will not be taken up by the UK’s Competition and Markets Authority (CMA).

The dispute, over sugar prices, did not pass the CMA's prioritisation procedure.

Real Good Food's executive chairman Pieter Totté told investors on Wednesday: "The difficulties in the sugar market have been covered extensively elsewhere but there are signs that prices have reached their low point and will recover over the next two years.

"As stated above, we are examining options for our sugar business. Elsewhere I am delighted with performance in two areas in particular: in cake decoration, Renshaw has performed very strongly and our recent acquisition of Rainbow Dust Colours is already giving us sales opportunities both in the UK and across Europe, while in premium bakery, Haydens has continued to trade well, successfully expanding its customer base.

"We plan to give additional focus to these attractive sectors over the coming year.''

Overall, the group expects reported earnings, before any adjustments for one-off costs or restructuring of the group, to be significantly behind current market expectations for its full year ending March 31.

Real Good Food shares dipped 16.67% to 35p. @MasterMetals MasterMetals Blog

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