Premier Foods plc has tried to play down the impact its 2009 profit forecasts had on its share price today (14 January), which closed down more than 10% - the second-largest fall on the London Stock Exchange.

The maker of brands including Hovis, Bisto and Branston said a financing package the group put in place last year hit its stock, which plummeted on the back of the firm's 2009 trading update.

Shares in the UK's largest food group tumbled by more than 10%, closing at 33.5p, despite Premier insisting it had made "good progress" in 2009.

For the year ended 31 December, Premier expects to post full-year pre-tax profits to reach GBP165m (US$268m). Premier's 2008 pre-tax profits reached GBP183.6m.

However, analyst expectations for pre-tax profits were reported to stand at GBP161-176m.

Nevertheless, Gwyn Tyley, Premier's investor relations director, said the fall in the share price was unlikely to be due to the firm's forecast for pre-tax profits.

Tyley said the company's 2009 forecast was in line with analysts expectations. "The expectations for this year-end have been in the range of GBP161m-GBP176m all year so I don't think that will be the cause for the drop today. We are in line with what people were expecting," Tyley told just-food.

"The reason for the drop in the pre-tax [profit] is the new financing which we put in place back in March."

In March, Premier Foods launched a GBP404m rights issue to pay down its borrowings and ease concerns over its balance sheet.

For 2009, Premier forecast "encouraging" branded sales growth of 6.4%, reaching GBP1.7bn, although it said its own-brand sales would drop by nearly 16%.

Tyley said the UK's big brand owners had resorted to price promotions to protect themselves from growing competition from cheaper, own-label lines

"With brands as a whole across the market, promotional activity is up in the region of 10%. What we have seen is people switching from own-label to brands, particularly in bread where there has been a 15% year-on-year decline in own-label volumes for the market," Tyley said.

He added that in bread and in Premier's wider grocery business the firm had "exited" from a number of contracts in which it felt the firm "wasn't making enough money".

"The picture with own label is not one which gives us cause for concern because we have a strategy about driving branded growth. We have a policy of being very disciplined on own-label margins," Tyley said. "We will always have fluctuations in own-label sales; in other years we'll be picking up more contracts than losing."

Tyley added that Premier plans to "capitalise" on the UK's "appetite for well-known brands" by launching products this year, including Hovis '100% British wheat'.

He added that another priority for Premier would be to pay down debt.

"We see that we should be able to generate GBP100m of free cash flow," Tyley said. "We always review the portfolio to see if there's anything that could do better in somebody else's hands and that would make sense to sell but there's certainly no plans for that, so it's a strong focus on organic cash generation."

Panmure Gordan analysts said Premier's trading profits were at the "bottom end" of expectations for the year and its 35p price target remains "very cautious".

"Branded growth remains impressive … although own-label and meat-free performance remain weak. We would expect consensus forecasts to edge back for 2010. We are not changing our forecasts for 2010 ahead of speaking with management," the analysts said this morning.