Premier Foods' profits fall as sugar price rises and supermarkets cut promotions

 
Helen Cahill
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Premier Foods makes Mr Kipling cakes (Source: Premier Foods)

Premier Foods' profit fell by 10 per cent this year as the manufacturer of Mr Kipling cakes struggled with rising input costs due to the Brexit vote.

Sales have also been hit by a fall in promotional activity in the supermarkets.

The figures

Premier Foods' adjusted profit before tax for the year ending 1 April fell 11.8 per cent, down from £84.2m to £74.2m.

The group's underlying sales also edged downwards from £801.3m to £790.4m, a fall of 1.4 per cent. International sales jumped 18 per cent.

Read more: Manufacturing giant Premier Foods considers price rises due to Brexit vote

Over the next two years, the food giant expects to deliver cost savings of £20m.

At time of writing, Premier Foods' share price was down 1.16 per cent.

Why it's interesting

Premier Foods recently announced that it was extending its deal with Mondelez International to make Cadbury cake until 2022, a licence covering 46 countries. The good news has boosted the company after a difficult year. Premier Foods and other suppliers have been forced to increase prices due to the fall in the value of sterling since Brexit.

Read more: Roll on 2022: Premier Foods locks in deal with Cadbury owner

In particular, rising prices on commodities such as sugar, chocolate, dairy, wheat and palm oil are presenting difficulties for Premier Foods. Today, the firm said it had been working with customers to negotiate price rises, but it appears the conversations were difficult, with Premier Foods admitting the process "took longer than originally forseen".

Supermarkets have also been cutting their promotional deals, such as multi-buy deals, which has weighed on Premier Foods' sales volumes.

What Premier Foods said

Gavin Darby, chief executive of Premier Foods, said: "This financial year has been a challenging one for the industry, with the return of food inflation and changing retailer promotional strategies.

"With the industry changing rapidly, we have updated our strategy to give an equal focus to revenue growth, cost efficiencies and cash generation. In the UK, growing ahead of our categories continues to be a core objective for us and our plans for international are for further strong growth."

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