UPDATE 2-McBride plans UK job cuts to slash costs

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By Rhys Jones

LONDON, Sept 4 (Reuters) - Household and personal product maker McBride (MCB.L) will slash UK production jobs to cut costs after rising oil prices dented annual profit but said the emergence of discount retailers could boost 2009 sales.

The group, which supplies Tesco (TSCO.L) and Sainsbury (SBRY.L) with private label goods from dishwasher tablets to deodorant, recently bought a new factory in St Helens, north-west England, into which it will transfer production from plants in Coventry and Warrington.

"We're moving most of our UK production to a new facility in St Helens, which will give us the opportunity to significantly reduce our UK headcount, which currently stands at about 2,200," Chief Executive Miles Roberts told Reuters on Thursday.

The move would result in the closure of the group's Coventry facility and downsizing its Warrington site, which would generate cost savings of up to 1 million pounds ($1.78 million) annually, McBride said.

The group expects related restructuring costs to reach around 2 million pounds, largely due to redundancies and remaining property lease obligations.

The company reported on Thursday adjusted operating profit for the year to end-June fell 30 percent to 21.4 million pounds but revenues rose 18 percent to 700.9 million pounds, reflecting a full year's contribution from prior-year acquisitions.

McBride said it made solid progress in many areas during the year but that significant increases in its input costs, driven by the sharp rise in the oil price, hit profit hard.

"We took a 70 million pounds hit on oil last year. In June 2007 a barrel of oil cost $63 but by the end of the last fiscal year it was $125 so some 60 percent of our income went on raw materials and components," said Roberts.

In the UK, McBride's annual operating profit fell 38 percent to 15.2 million pounds, reflecting the time lag between cost increases and mitigating action, it said.

In western Europe operating profit jumped 10 percent to 11.4 million pounds, while eastern Europe delivered operating profit 40 percent higher at 2.1 million pounds due to largely organic growth and exchange rate movements.

McBride's shares, which have lost 6 percent of their value since the start of 2008, were trading 7.3 percent lower at 102 pence by 1024 GMT, valuing the firm at 183 million pounds.

McBride hopes to benefit from consumers trading down to discount retailers as they curb spending to cope with higher food, fuel and mortgage costs.

"Given the grim economic situation, we see a big opportunity for private label products with clients such as Aldi (ALDA.O) and Lidl. Discounters will continue to grow because the economic environment is supportive for them right now," Roberts said.

In 2007 McBride made a number of overseas acquisitions, including Dasty Italia, Darcy Industries and Henkel's (HNKG_p.DE) European Private Label Household products business.

The firm, which has 15 manufacturing sites in six countries and now does around two-thirds of its business in Europe, intends to keep growing on the continent to offset the weakening performance of the UK market.

"Our strategy is to keep growing our European business as there are incredible opportunities for private label growth, especially in Italy," Roberts said.

McBride held its final dividend at 5.6 pence. (Editing by Will Waterman and Sue Thomas)