Premier Foods, the Oxo to Mr Kipling producer, today said that it was selling off its frozen foods business as it revealed that comparative sales during the first six months of the year are expected to dip, hit by competition for bread and rising wheat prices.
Premier was the biggest FTSE 250 faller in early trading, when shares lost 5.11 per cent, or 15p, declining to 278.25p.
The company is understood to already in talks with parties about buying its frozen foods group, acquired with the £1.2 billion purchase of RHM in December, which generates annual sales of £50 million and manufactures no-label products which supermarket groups then re-brand with their own trademark.
The move comes just days after Premier announced it was closing down six factories and cutting 600 jobs, provoking union ire when the Transport and General Workers’ Union accused the business of behaving “like private equity”. At the same time as making cuts, the company will create 300 new roles.
The job cuts follow the RHM acquisition and the £460 million purchase of Campbell, the soup maker, in July last year.
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Premier said that like-for-like sales, which strips out turnover from businesses acquired over the period, will be “slightly behind” the first six months of 2006 after the company has ended some no-label contracts and cut advertising spend, particularly on its baked beans. However, with contributions from both RHM and Campbell, sales for the first half of 2007 will be “significantly higher” than the same period last year.
The company admitted today that it will have to increase the price of its Hovis-branded breads because of the higher cost of wheat as well as increased competition from other breads. For example, Associated British Foods is investing in a major relaunch of its Kingsmill bread, although Premier said today that it will release new seeded varieties of its Hovis loaves.
While some businesses are expected to report poor trading as a result of the recent poor weather conditions, conversely Premier has gained with colder conditions pushing shoppers towards “comfort foods” such as soups and cakes.