Premier Foods to offload businesses after poor 3Q results

- Published: 07 October, 2011

Premier Foods today reported 3Q group results ‘significantly below expectation’, announcing that it will dispose of many of its businesses to concentrate on eight core brands, as a result of its recent underperformance.

Following a year-on-year decline reported in June 2011, group sales in the three months to 30 September 2011 were down again by 3.6% to £447m, while market share also declined 1.9%. Volumes were down 8.0% with price and mix contributing 4.4%. Premier Foods’ non-branded sales were up 1.2%, whereas branded sales were down 6.0% reflecting a market shift towards non-branded products.

Although the company admitted that market trends have improved, it said that volumes have not fully recovered from its spat with a customer (known to be Tescos) earlier in the year and re-building the in-store presence has proved slower than anticipated. After losing a significant pie contract earlier in the year, sales at own-label chilled food manufacturer Brookes Avana declined 13.2% compared to the previous year.

The new chief exective officer Michael Clarke outlined steps to restore profitable growth, which included refinancing and disposing of parts of the portfolio. The company has identified eight brands to concentrate its resources on in the hope that this will drive future growth, including Bisto, Oxo, Sharwood’s, Batchelor’s, Ambrosia, Hovis, Loyd Grossman and Mr.Kipling.

Clarke, who joined the company in September from Kraft Food Group, said: “While the current trading performance continues to be disappointing and significantly behind our expectations, we have already identified a number of steps to build a more profitable business. These include focusing on eight ‘power brands’, strengthening our sales and marketing execution and reducing our cost structure.

“Our immediate priority is to conclude discussions with the banks to revise our banking covenants and put in place refinancing facilities. This process is well underway and we are hoping to reach a successful conclusion in due course.

The company also said it will move away from concentrating on short-term tactical trading activities, instead working more collaboratively with customer partners to deliver category growth through greater and more focused product innovation, improved in-store marketing, promotional planning and other brand-building initiatives. However, as a consequence of reducing the scope of it business, it said that it will significantly exceed the £20m cost saving target by 2013 announced at the half year results.

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