Premier Foods cuts sales outlook on tough UK grocery market

Wednesday 18 June 2014 08.33
Premier Foods said its cost-cutting programme would offset lower sales
Premier Foods said its cost-cutting programme would offset lower sales

Premier Foods, the maker of Mr Kipling cakes and Bisto gravy, today cut its forecasts for annual sales growth at its key brands due to the UK's "subdued" grocery market. 

The company said, however, its outlook for full-year profit was unchanged as its cost-cutting programme would offset the lower sales. 

Premier Foods had expected to grow sales of its "power brands" which includes Batchelors soup products and Ambrosia custard treats by 2-3% over 2014.

But it reassessed its forecast after second quarter sales fell behind expectations.

The retailers who sell Premier Foods products are facing the slowest rate of growth in Britain's grocery market since 2005, illustrated by tough trading at UK supermarkets like Tesco and Morrisons. 

"While power brands sales for the second quarter are anticipated to be negative and below the company's expectations due to subdued grocery markets, profit expectations for the twelve months to 31 December 2014 remain unchanged," the company said. 

Currently analysts expect Premier Foods to post pretax profits of £82m for 2014 according toThomson Reuters data. 

After a costly acquisition spree, Premier Foods has spent the past few years selling assets, reshaping its business and cutting costs to help reduce debt, pinning its prospects on growing a streamlined group of high-margin grocery brands. 

In March, it undertook a £1.13 billion refinancing package designed to reduce its borrowings, and also struck a new pensions agreement. 

Premier Foods also today said it planned to develop a stand-alone joint venture to process and pack powdered products at one of its facilities in a deal which should improve efficiency, and that its logistics business had made progress with cutting costs.