Northern Foods to mothball factory

LONDON (Reuters) - Northern Foods said on Tuesday it plans to mothball a factory which makes Italian ready meals for Marks & Spencer, putting the jobs of 6.6 percent of its workforce at risk.

The Leeds-based company, which also makes Fox's biscuits and Goodfella's pizzas, said it plans to stop production at its Fenland Foods factory at Grantham, England in August.

Northern Foods said it is closing the factory, which broke even in the year ended 29 March, because it failed to make an adequate return for shareholders.

Following the sale of unprofitable businesses a year ago, Northern Foods now focuses on ready meals, sandwiches, salads, pizza, biscuits and Christmas puddings.

Northern Foods shares were down 4 percent at 85 pence at 11:59 a.m., underperforming a 1.7 percent fall in the FTSE mid-250 index.

Chief Executive Stefan Barden said in a statement: "The Fenland facility would remain mothballed whilst we explore opportunities to secure profitable new business with other customers for the site."

The ready meals made at the factory represent about 45 million pounds of annual sales, the company said. For the year ended March 31 2007, group revenue from continuing operations was 888.5 million pounds.

Northern Foods employs 730 people at the factory, representing 6.6 percent of its 11,000-strong workforce. The company said it has begun a consultation with staff affected by the proposed closure.

There would be a one-off cash restructuring cost and a non-cash write-down of asset value, which will be reported in the 2008/09 financial results, the company said. At 29 March, the site had a net book value of 24 million pounds.

(Reporting by Erica Billingham; editing by Sue Thomas)