Premier Foods off the boil after profits warning

30th Jun 2011 14:54

Food manufacturer Premier Foods warned of a significant drop in profit for the first half of the year, reflecting higher input costs and sluggish consumer spending heightened by unseasonably warm weather.The company, whose brands include Hovis bread, Branston pickle and Sharwood's cooking sauces, expects to report trading profit of between £65m and £70m, compared with £94m last year. Premier Foods said commodity costs rose 14%, equivalent to an £150m increase in costs in a full year, and said the time lag before the re-pricing of its products took effect resulted in a one-time cost of £15m in the first quarter. The Brookes Avana business, which has Marks & Spencer as its main customer, recorded a decline of £10m in profit. The company said its grocery and bread markets fell by 5% due to adverse weather conditions. It added that additional volumes and the benefits of efficiencies will reflect a year-on-year progress in the grocery business but is unlikely that this "will offset the first half profit decline in full."Premier Foods said, "Given the state of the economy and pressure on consumer spending, we expect these slow market conditions to improve on the first half but continue to be down year on year in the second half."The company is cutting its 2011 capital expenditure and is seeking to mitigate the effect of the fall in trading profit, which will allow the company to reduce net debt over the year.Shares of the company, which have risen 30% from 1 January to 25 June, sank more than 15%. Shares were trading down 14.6% at 20.90p at 3.15pm in London. AR