High input costs eat into Premier Foods profits

5th Aug 2011 08:09

Food manufacturer Premier Foods reported a 29% drop in trading profits from ongoing operations, hurt by higher raw material costs and partly from a temporary pricing dispute with its major customer, sending its shares lower. For the half year ended 25 June, the company saw profits fall 29% to £69m, down from £94m, in the corresponding quarter a year earlier. The company, which makes Hovis bread and Hartley jams, also blamed the profit fall on sluggish consumer spending heightened by unseasonably warm weather."This was a challenging period not only for Premier Foods but also for the food industry as a whole. We faced a combination of reduced consumer spending and significant raw material inflation. We were further hampered by a temporary pricing dispute with one of our major customers which has since been resolved and by underperformance at Brookes Avana," chief financial officer Jim Smart said in a statement.Premier Foods, however, reduced its net debt to £1.13bn, down £225m, on a year-on-year basis and expects the pro-forma net debt to decline to £972m after the proceeds from the Canning business sale are received.Shares of the company, which have halved in value in the past three months, slumped more than 18% in early morning trading session. Shares of Premier Foods fell 18.2% to 12.5p.AR