Shares dive at Premier Foods

Premier Foods, Britain’s biggest food maker, saw its shares plummet 120p to 85.25p on the London Stock Exchange yesterday after speculation that it is in financial difficulty.

This was the lowest level since the company floated in 2004. Shares recovered during afternoon trading to close down 11.75p at 108.75p.

However, the shares were also hit by a broker’s negative comment. Shore Capital said that 2008 will be a challenging year for the food industry. The broker said there would be stiff competition from rivals Warburton’s and Allied Bakeries as well as pressure from supermarkets to keep prices down.

There has been speculation that increasing raw material prices meant the company would have to issue more shares to pay its debts. However, the maker of Hovis bread and Mr Kipling cakes said it was not contemplating a rights issue to raise funds.

The cost of wheat and dairy products rose considerably last year driving up Premier Foods’ costs.

Premier Foods has debts of around £1.7 billion following its £1.2 billion acquisition of Mr Kipling firm RHM last year, and its £450 million deal for the UK arm of Oxo and Homepride company Campbell’s Soup in 2006.

The company employs 360 people at its Quorn sites in Stokesley, North Yorkshire, and Teesside.

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