The CFO of Premier Foods plc, Jim Smart, today (5 August) described the company’s first-half trading results today as being “poor by any measure”.
The comments came as the UK’s largest food manufacturer recorded an expected drop in first-half profits. The company posted a 28.7% fall in trading profit from ongoing operations to GBP67m (US$109m).
Premier attributed the lower profits in part to weak consumer confidence, rising input costs and a difficult trading environment and chairman Ronnie Bell did not offer many reasons to inspire optmism. He said consumer confidence would remain “the same, if not worse for the balance of the year and into 2012”.
However, Smart argued that Premier expects a better result in the second half of 2011, now that it has completed its moves to increase prices and has seen products relisted with one of its major customers, believed to be Tesco, after a dispute over price.
Premier, Smart said, had spent the first part of the year talking about prices with its retail customers when its rivals focused on offers.
“Promotions tend to get discussed one quarter ahead so, during quarter one when we were talking about pricing with the trade, they were talking about promotions, so other people got the promotional slots during quarter two. The good news is that during quarter two, we were talking about promotions for the second half of the year and we’re very happy with the programme that we’ve mounted,” Smart said.
Premier’s increased levels of promotions and its moves to cut operational costs could mean that the company’s sees “year-on-year progress” in profits in the second half, Smart said.
In the wake of Premier’s sale of its canned food business, the company has revealed plans to save GBP20m in costs a year through restructuring its logistics network and head office.
Panmure Gordon analyst Graham Jones seemed sceptical that Premier will turn the business around in the back half of the year. “They do point out that the outcome for the full year will be dependent on the important Christmas trading period and we would expect market confidence in forecasts to remain low,” he said.
Elsewhere, Investec analyst Martin Deboo said that “Premier’s challenge is now to ensure its survival in H2”.
Premier’s new CEO Michael Clarke is set to join the company on 1 September and Deboo said he will need to take some “swift actions to improve trading, defend the balance sheet and cashflow and rebuild confidence amongst his staff, suppliers, customers and investors”.