Premier Foods cautious as wheat prices surge

4th Aug 2010 07:14

Premier Foods warned that a surge in wheat prices in the past month means second half profit at its Hovis division is unlikely to match levels seen in 2009.Severe drought in Russia, one of the biggest exporters of the grain, has pushed prices up nearly 50%. Gary Sharkey, head of wheat procurement at Premier Foods, told the Financial Times that the food industry "will be unable to ignore a 50% rise in wheat prices." "With the competitive marketplace and rising wheat costs, which have in recent weeks begun to escalate, it is unlikely that the division's second half profit will match its 2009 profit level as this period last year particularly benefited from wheat price deflation," the group said in a statement. The maker of Hovis bread, Branston pickle and Sharwood's sauces today revealed a wider half year pre-tax loss and said input prices among wheat, dairy, cocoa, paper and plastic packaging are all rising. Pre-tax losses for continuing operations widened to £54.4m in the half year ended 26 June from a loss of £30m a year earlier. Total sales fell to £1.18m from £1.24m before. Branded sales for the six month period fell to £771m from £774m in 2009.Commenting on the results, chief executive officer, Robert Schofield said, "We are controlling costs tightly and have made good progress in strengthening our cash flow and reducing debt."Net debt at 26 June 2010 stood at £1.37bn, down £110m year on year.