Premier Foods to cut dividend

TROUBLED food manufacturer Premier Foods – whose shares have dropped by more than 50% since the start of the year – has cut its dividend to save money on the back of soaring wheat prices.

The group, whose brands include Hovis and Mr Kipling, said it would cut its final dividend to 2.2 pence to ease the pressure on its finances, giving it a total of 6.5p for the whole year.

The St Albans-based business announced losses of £73.5m – largely blamed on costs integrating RHM and Campbells Soup into the group.

Operating profits dropped from £ 110.5m to £76.1m with total sales increased to £2.25bn from £840.7m the previous year.

Premier – which manufactures a range of market leading branded and own-label products – employs 360 people at its Quorn sites in Stokesley, North Yorkshire, and Teesside.

The group said that sales of convenience foods had slowed down and the bread market remained competitive but sales of products including Quorn has risen.

Chief executive Richard Schofield warned that the market will remain highly competitive in 2008 with input cost inflation continuing to be a factor.

He said: “The downside to 2007 has been the exceptional level of cost inflation that we and other food companies have faced. Whilst we have moved quickly to raise prices, the inevitable time lag between cost increases and raising prices reduced second half profitability and has caused temporary market imbalances as seen by our bread division. At December 2007, we had recovered some £190m of the £225m of annualised cost inflation that we saw in 2007 and we intend to recover the remaining costs during the first quarter of 2008.”

He added that expected inflationary pressures in 2008 had led the group to reorganise its banking covenants and extended its loans. It has also agreed an additional £125 m short term facility with a 'small group' of its lead banks.

Looking forward Mr Schofield said the group would focus on integrating its divisions.