Premier Foods posts annual loss, tough year ahead

Debt-laden Premier Foods has slashed its dividend payout and warns that it faces a challenging year as the firm suffers from soaring raw-materials prices.

The group said it will pay 6.5 pence a share to investors which should save it £50 million in the next 12 months.

The St Albans based company posted a pre-tax 2007 loss of £73.5 million, compared with £59 million previously.

Shares in the group have fallen 60% since the start of 2008 but increased 12% yesterday after it allayed fears that it would not be able to meet its repayments on the bank loans it took out to finance its £1.2 billion acquisition of RHM.

Premier gained ownership of the Hovis brand as well as Mr Kipling cakes following its takeover of RHM in March last year.

Chief executive Robert Schofield, said what we have in place now is plenty. We are very comfortable and believe that we have addressed all the issues.

The company said it only recovered £190 million of the £225 million of raw-materials price rises it suffered on wheat, milk and fruit last year. It plans to pass the rest through in price increases this quarter but still expects that to knock trading profits by £10 million.

Premier said sales of white loaves fell following tough competition in the branded-bread market.

Analysts at Panmure Gordon said Premier has given no outlook for 2008 other than to say H1 will be tough. We expect nervousness to remain.

Premier Foods is the maker of brands such as Hovis, Oxo, Bisto, Branston and Campbell’s Soup.

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