Premier Foods profits fall as costs rise

Food manufacturer Premier Foods said it was seeing an improving trend in its second half as it posted an expected 29 per cent fall in first-half profit, hit by higher commodity costs and a depressed consumer environment.

The maker of Branston pickle, Bisto gravy and Hovis bread said Friday it made a trading profit for its ongoing businesses of £67m in the six months to 25 June.

That compares with company guidance of £65-70m and £94m made in the same period last year.

Premier Foods, which also makes Mr Kipling cakes, Loyd Grossman sauces and Hartley's jam, attributed the decline in profit to a 14 per cent year-on-year rise in commodity costs, a temporary loss of contracts from a major customer, and reduced demand in UK grocery and bread markets.

The firm said repricing in its second quarter and a strong promotional program should help the firm win market share going forward.

"The outlook is, as in any year, dependent on the Christmas trading period," it said.

Premier Foods has been selling businesses to bring down its debt, which ballooned following the acquisitions of RHM and Campbell Soups' UK and Irish business in 2006.

It sold its canned food and meat free businesses this year for a combined £362m, helping to bring down its net debt to £972m.

Premier Foods said a logistics and head office restructuring will yield £20m in annual savings by 2013.

Chief executive Robert Schofield will retire from the post on September 1 and be succeeded by former Kraft executive Mike Clarke.