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March 4, 2008

UK: Premier in a pickle during 2007

Premier Foods, the UK’s largest food manufacturer, has slashed its dividend after posting a loss for 2007 due to rising commodity costs and mounting debts.

Premier Foods, the UK’s largest food manufacturer, has slashed its dividend after posting a loss for 2007 due to rising commodity costs and mounting debts.


The Branston pickle-to-Hovis bread maker today (4 March) booked a pre-tax loss of GBP73.5m (US$146m) for 2007, compared with a profit of GBP59m a year earlier.


Premier’s total dividend for the year is 6.5p, down from 12p in 2006.


The company has been forced to amend its banking facilities after the takeovers of RHM and Campbell Soup Co.’s business in the UK and Ireland.


Premier said it had secured an extra GBP125m short-term facility with leading banks after seeing interest payments on the cash it used to buy RHM and the Campbell units more than triple.


Chief executive Robert Schofield said cost inflation had led the company to rejig its facilities with the banks.


“Given the high level of input cost inflation in 2007 and the potential for further inflationary pressures in 2008, we consider that it is prudent to increase the financial headroom available to us to ensure that our investment programmes can proceed to plan,” he said.


Schofield said Premier had looked to increase the prices on its products to offset rising commodity costs. “At December 2007, we had recovered some GBP190m of the GBP225m of annualised cost inflation that we saw in 2007 and we intend to recover the remaining costs during the first quarter of 2008,” he said.


Profits from Premier’s bread business tumbled by more than 48% on a pro forma basis. Fierce competition from the likes of Warburtons has hit Premier’s flagship bread brand Hovis.


However, Premier said it would look to regain its share of the UK bread market by positioning Hovis as the “healthy bread brand”.


Profits from Premier’s culinary brands fell 6.1% on a pro forma business due principally to input costs.


Underlying group turnover rose 1.4% to GBP2.6bn.

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