Profit slump warning for Premier Foods

Food giant Premier Foods has issued a profits warning as it revealed a slump in sales across well-known brands.

Food giant Premier Foods has issued a profits warning as it revealed a slump in sales across well-known brands.

The UK's largest food manufacturer – which used to have canning factories in Wisbech and Long Sutton– said sales volumes had fallen 8pc in the three months to September 30. Hovis saw volumes drop 13.5pc in the period.

The firm sold its canning operations at Wisbech and Long Sutton to rival food brand Princes for �182m in July.

The heavily indebted group, which also owns Ambrosia and Bisto, said it would sell off a number of businesses to focus on eight 'power brands' in a bid to drive future growth.

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Premier chief executive Michael Clarke said the trading performance was 'significantly below expectations' and the company will not meet last year's profit in the second half as previously expected.

Premier said it was holding talks with lenders to prevent it from breaching agreements – which will be tested at the end of the year – over its debt. Mr Clarke, who joined the business from Kraft, said he hoped the discussions would 'reach a successful conclusion in due course'.

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Premier said full-year profit expectations were between �214m and �232m – but it no longer expected to meet that range. Trading profit in the year to December 31 was �311m.

The manufacturer also said its net debt would be higher than the �850m forecast for the full year.

Mr Clarke refused to identify brands which would be up for sale but would not rule out any of the labels outside the so-called 'power eight'.

Meanwhile, Mr Clarke said a previous price spat with Tesco – which saw the supermarket pull a number of its brands, including Hovis – was still hurting business.

Shares in Premier Foods slumped more than 30pc following today's update and have fallen more than 80pc since May.

Premier built up its debts in a buying spree last year that saw it snap up the likes of Hovis owner RHM. The company plans to reduce the scope of its business and would see it exceed its cost savings target of �20m by 2013.

Mr Clarke said the overall performance of the group depended on the crucial fourth quarter, when many of Premier's brands enjoy strong Christmas sales.

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