Mixed message from Premier Foods

PREMIER FOODS, which employs hundreds of people in Yorkshire through its ownership of the meat substitute Quorn, today said trading over the Christmas period had been “satisfactory” but warned that sales of retailers' own branded products had been hit.

Premier, which is home to some of the biggest names in the kitchen including Oxo stock cubes, Branston Pickle, Hovis and Bird's Custard, said it expected to unveil increased sales in continuing operations of 165% when it announces its full year figures, thanks largely to the acquisitions of Campbell's and RHM.

The deals made it the UK's biggest foods supplier ahead of names including Mars and Northern Foods.

In a trading update today, Premier said although branded sales grew by 3% in the second half of the year to December 31, retailer branded sales declined by 8%.

The group said despite cost pressures on items such as wheat which had affected trading, and pushed the price of a loaf of bread up at its bakeries business, it expected trading profit to be in line with market expectations.

It said pro forma sales over the second half were 3% and 1.4% across the full year.

Robert Schofield, chief executive of Premier Foods, said: “After a slow first half, we have seen sales growth improve during the second half, although this has been held back by the decline in retailer branded sales in the core Premier business.

“We mentioned earlier in the year that we foresaw considerable raw material and packaging inflation led by wheat but also affecting dairy, fruits and vegetables in particular.

“Whilst these additional costs have had an impact in the second half of 2007 we have now recovered a large proportion of these cost increases through pricing and cost savings, which should provide a solid platform for the development of the business in 2008.”

Mr Schofield added that Premier was pleased with the way Campbell's and RHM had integrated themselves into the group but warned that seven factories would close over the next two years, in addition to two which were shut in 2007, as part of a “manufacturing rationalisation plan”.

Premier owns the Quorn meat substitute that employs some 360 people in Stokesley, North Yorkshire, and Teesside.

Its culinary, cakes, customer partnerships and bread bakeries divisions saw sales increase in the second half compared to the same period in 2006.

Premier said it anticipated its underlying interest charge would be approximately £110m, comprising £106m of cash interest costs and £4m of amortisation of debt costs.

It also said exceptional costs would be between £120m and £130m following the closure of sites.

Premier added that it expected cost inflation to continue to be a factor in performance in 2008.