Premier Foods' profits down 28.7%

Food manufacturer Premier Foods has reported a year-on year decline, with profits down 28.7% to £67m in the half year ending 25 June 2011.

The company said the challenging trading conditions were due to a depressed consumer environment exacerbated by unseasonably warm weather and raw material cost inflation. It also acknowledged that its spat with a major customers (known to be Tesco) and the loss of a major pie contract, with M&S had had a significant effect.  

Branded sales in the half year were down 3.2% to £632m, with meat-brands Oxo and Bisto particular affected by the customer dispute, showing declines of 22.3% and 3.8% respectively.

Chief financial officer Jim Smart said: “This was a challenging period not only for Premier Foods but also for the food industry as a whole. We faced a combination of reduced consumer spending and significant raw material inflation. We were further hampered by a temporary pricing dispute with one of our major customers which has since been resolved, and by underperformance at Brookes Avana.
“We were successful in passing on the majority of our higher input costs, completed two significant disposals and reduced our borrowings. We have continued to deliver efficiencies in line with our targets and have now commenced a further cost saving programme.”

The sale of both its meat-free business and canning business completed had raised a total of £362m, with logistics and head office restructuring set to yield £20m in annual savings by 2013;
Premier Foods is the UK’s largest food producer, which manufactures, sells and distributes a wide range of branded and retailer branded foods.  Its ready-meal subsidiary, Brookes Avana, reported sales up 3.9%, although the loss of the £30m pie contract will lead to restructuring in its Leicester site and the company said it expected to incur losses in the division over the second half of the year.

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