Shares in Premier Foods, Britain’s biggest food producer, closed down more than 10 per cent yesterday after it said that full-year pre-tax profit would be at the lower end of expectations.
The St Albans-based company, which makes own-brand goods for supermarkets as well as a plethora of household names such as Hovis and Oxo, said that it expected to report a profit of £165 million on February 16. Analysts’ forecasts had ranged between £161 million and £176 million.
Premier said that supermarket price promotions and new product launches helped sales on its branded goods grow to about £1.7 billion, accounting for 63 per cent of total sales in 2009, compared with 61 per cent the year before. However, the promotional activity and rising costs ate into profits.
Total sales in the fourth quarter were up 1.5 per cent, with branded sales in its grocery division, which accounts for 60 per cent of turnover, up by more than 8 per cent. Premier recently decided to abandon some low-margin contracts with retailers, sending own-brand grocery sales in the period down 5.3 per cent.
Premier said that it had enjoyed especially strong performances from its Ambrosia desserts range and Loyd Grossman sauces, while sales were also lifted by product launches — such as that of Mr Kipling Christmas Puddings — and the bumper Christmas experienced by supermarkets. In its Hovis division, sales of branded bread rose by 7.5 per cent, while sales of own-brand loaves fell 25 per cent.
Advertisement
Robert Schofield, Premier chief executive, said that the recent snowy conditions had seen sales in salt surge by 500 per cent, as homeowners tried to keep paths and driveways from icing over, while sales of Batchelors Cup-a-soup had risen by 50 per cent. Premier shares closed at 33½p.
Meanwhile, Northern Foods, which makes branded goods such as Fox’s biscuits as well as products for chains ranging from Marks & Spencer to Aldi, said in its third-quarter update that it continued to trade in line with expectations, with year-to-date like-for-like sales up 1.9 per cent.
However, third-quarter sales were flat as a result of its planned exit from some low-margin frozen pie contracts — a strategy that followed its acquisition of the McDougall’s pie brand.
Revenues in Northern’s frozen foods business contracted by 10.5 per cent in the quarter as a result, although Stefan Barden, chief executive, highlighted that the focus on higher-margin products meant that profits in the division continued to recover.
“We have a focus on growing profitability. If it is right for the bottom line then we do not have a problem explaining away reduced sales,” he said.
Advertisement
Leeds-based Northern Foods said that it had put in a solid performance in the Christmas period, producing 160 million biscuits in the run-up to Christmas. The company retained its crown as the number one maker of Christmas puddings — but conceded that its leading Matthew Walker brand lost some market share following the launch of a rival Mr Kipling product — and the bakery division saw revenues rise by 1.4 per cent.
Sales at its chilled division were up by 5.4 per cent, driven by strong growth in sandwiches and salads, although the recent closure of its Hull factory affected volumes of ready meals.
Mr Barden said that market conditions remained “competitive”, but that he expected full-year operating profit to fall in line with the £54.3 million consensus, with cash generation to remain strong. The shares closed slightly lower at 66½p.