Abu Dhabi, UAEWednesday 21 August 2019

Huge Ocado robotic warehouse blaze to hit sales

UK online grocery major's automated distribution facility helped it win big deals to sell its technology to US group Kroger and others

Robots operating on the grid of the 'smart platform' at the Ocado CFC in Andover, southern England. Reuters
Robots operating on the grid of the 'smart platform' at the Ocado CFC in Andover, southern England. Reuters

A fire at Ocado's flagship robotic distribution centre will hit sales growth, the British online supermarket pioneer said on Wednesday, sending its shares sharply lower.

Around 20 fire engines and 200 firefighters were called to the highly automated site in Andover, southern England, early on Tuesday to tackle a blaze that raged for over 24 hours.

"While we are informed by the Fire Brigade that it is now under control, during the night part of the roof collapsed and there has been substantial damage to the majority of the building and its contents," Ocado said.

Firefighters at the scene of a fire at the Ocado robotic warehouse in Andover, England. AP
Firefighters at the scene of a fire at the Ocado robotic warehouse in Andover, England. AP

The Andover site was providing about 10 per cent of Ocado's capacity.

"As a result of this incident there will be a constraint on our ability to meet our growing customer demand and there will be a reduction in sales growth until we can increase capacity elsewhere," it said.

Ocado said it had insurance cover for the property, stock and equipment on site, and for business interruption losses.

The Andover plant, which can process 65,000 orders a week, is Ocado's third automated warehouse and has been instrumental in the firm winning four major deals to sell its technology to international retailers such as US group Kroger Co and France's Casino.

While Ocado's first two centres required humans to load thousands of crates travelling on miles of conveyor belts, Reuters said, Andover has hundreds of robots speeding along at four metres per second on giant grids.

Ocado said on Tuesday the fire had broken out on one of the grids of robots, forcing it to suspend operations.

The group was founded by three Goldman Sachs bankers 18 years ago. After struggling for years to post a profit it has flourished in the past year and nearly doubled its stock market value after striking the technology deals.

Its shares were down 8 per cent at 09.22 GMT.

The group's £7 billion (Dh33.34bn) market valuation is linked to its future as a technology provider to international retailers needing to roll out online delivery services to compete with tech giants such as Amazon.

In Britain it has a 1 per cent share of the grocery market.

The company on Tuesday reported full-year earnings and cautioned that investment in partnership deals would hit short-term profits.

It made earnings before interest, tax, depreciation and amortisation of £59.5 million in the year to December 2 2018, down from £75m in 2016-17.

Group revenue rose 12.3 per cent to £1.6bn.

Also on Tuesday, Ocado said it remains confident in achieving revenue growth of 10 per cent to 15 per cent in 2019 after it got a boost from a year of deals, including its mammoth partnership with Kroger.

The company’s confidence in its financial outlook came with a caveat, according to Bloomberg: “assuming economic conditions remain broadly stable.” The prospect of a messy British exit from the European Union in March clouds the near-term picture.

Last year’s results were boosted by a string of deals, including with Sobeys, ICA and the company’s biggest deal yet, with Kroger. The US grocer agreed to buy a stake in Ocado and licence technology that runs logistics systems to help grocers deliver food to customers’ doors.

Ocado made no mention of media speculation that it’s in talks with Marks & Spencer for a potential tie-up.

Updated: February 6, 2019 02:46 PM