Premier Foods ’on course for goals’

Nov 13 2007 by Iain Laing, The Journal

HOVIS bread maker Premier Foods has said it is on course to hit annual profit targets – despite a slump in bakery sales.

The Branston pickle to Hartley’s jam firm reported a 3% rise in like-for-like group sales for the four months to October 31, and expects further sales growth in the run-up to Christmas.

But profitability at its bakery division has fallen after the firm raised bread prices twice since September. Competitors have taken market share after they delayed similar price rises to offset higher wheat costs.

Premier said: “We are pleased to have achieved further bread prices increases to offset higher wheat costs but we anticipate that our bread volumes will continue to be affected whilst a disparity in retail prices between the main bread brands remains.”

The company this last summer unveiled plans to invest £35m in one of its Teesside factories. It is to build an additional fermentation unit at its Marlow Foods site at Billingham which produces Quorn. It did not say whether it would create more jobs following the investment.

Since suffering an “unprecedented” rise in grain costs, Premier has cut jobs at a bakery in Bradford and a distribution depot in Telford.

But the firm said it had been bolstered by its 2006 acquisition of soup brand Campbell’s, which has enjoyed sales growth, and Mr Kipling firm RHM, which was bought in March. Premier expects the integration of RHM to bring annual cost savings of £85m. Analyst Rob Mann, of stockbroker Collins Stewart, said lower bakery profits had seen Premier “drastically” cut its annual growth forecast.

He said: “Nonetheless, there has been reassuring performance in the other divisions in the first four months of the second half, with management claiming it sees accelerating sales growth for the rest of the calendar year.”