Greggs bakery warns of rising wheat price impact
The UK's largest bakery chain, Greggs, has warned that rising wheat prices will contribute to tougher trading conditions in the coming months.
It said "ingredient costs" would rise after the price of wheat hit a 22-month high last week, with wildfires in Russia devastating crops.
The Newcastle-based baker gave the warning while reporting a sharp rise in profits for the first half of the year.
Pre-tax profit came in at £18.6m, up 12.3% on the £16.5m it made a year ago.
Revenue rose to £321m, from £312m, while like-for-like sales, which strip out sales from new shops, edged higher.
Despite tougher trading, however, the company said it was still on track to deliver "another year of progress".
A spokeman told the BBC that the impact of any further rises in the price of wheat would be mitigated by the fact that Greggs has agreed a fixed price for some of its supplies of flour until the beginning of next year. Flour accounts for just 2% of the company's total cost base.
"We have delivered a resilient first half performance under challenging conditions," said the baker's chief executive, Ken McMeikan.
"Our accelerated shop opening and refit programmes are progressing as planned and delivering encouraging early results."
Greggs performed well during the downturn as price-conscious consumers were attracted to its products.
It made a pre-tax profit of £48.8m in 2009.
The chain operates 1,400 shops, and it said it was on track to achieve its aim of opening between 50 and 60 more outlets this year.