Broker snap: RBS downgrades Premier Foods to hold

10th Oct 2011 12:31

RBS has downgraded its rating on Premier Foods from buy to hold and cut its target price by a whopping 84% following the group's profit warning on Friday. The food manufacturer revealed that third quarter results were "significantly below our expectations" and said that full-year trading profits will be below market forecasts."We believe an element of the profit loss from the 1H11 customer dispute (widely speculated in the press to have been Tesco) is at least semi-permanent, as competitors have been given greater shelf presence," RBS said.The broker cuts its full-year trading profit forecasts from £230m to £189m in 2011 and from £249m to £216m to 2012."Given the tough comparison (2010 was a good Christmas) and recent macro fears, we see downside risks to our forecasts."The target price now stands at just 6p, from 38p before.By 12:30 on Monday, shares were 2.59% up at 5.95p, attempting to recover from Friday's sell-off which sent shares tumbling over 40%.BC