RHM, maker of Bisto, Hovis, Mr Kipling and Sharwood’s, has said that results for the first half of the year are expected to be in line with forecasts, with a strong performance from its bread bakery division helping to mitigate the impact of increased wheat and energy costs and a poorer performance of the company’s culinary brands.
In a close period trading update ahead of the release of its first half results for the period ended 28 October, the company said it anticipates operating profits of approximately GBP70m (US$134m).
RHM said that bread bakeries has delivered good top line growth, as the company’s increased prices boosted turnover. Hovis, the company said, has continued to perform satisfactorily as consumers responded positively to new packaging, products and the ‘Hovis is for life’ advertising campaign.
The strong performance of this unit has helped offset higher wheat and energy costs, with the lag in recovery of wheat costs expected to have an impact of GBP2m in the first half of the year. The company said that the impact felt for the full year will depend on further wheat-price changes and the timing of bread price increases.
The exceptionally hot summer, some retailer destocking and an increasingly competitive environment had a negative impact on the turnover and margins of company’s culinary brands’ business in the first four months of the year. Trading in September and October has been good, RHM said, with higher sales of key brands including Bisto and Sharwood’s. Market shares remain strong, new product launches are progressing to plan and advertising and promotional campaigns have been well received, the company added.
The performance of RHM’s Cakes’ division showed continued improvement, with the Mr Kipling brand delivering “encouraging” like for like sales growth and market share gains and a positive consumer response to the launch of Cadbury’s branded cake bar range, introduced in early September.
RHM said the board remains committed to increasing group advertising and marketing spend in the current year by at least GBP5m. Advertising spend in the first half of the year increased by around GBP2m as a result of increased investment behind the Hovis, Bisto, Sharwood’s and Nimble brands.
Commenting on the results, Ian McMahon, RHM CEO, said: “We are on track to deliver further progress in the year as a whole, notwithstanding the impact of the current exceptionally high wheat price and our increased advertising investment.
“We are encouraged by satisfactory trading in September and October across all of our divisions and are now focused on delivering a successful Christmas period, continuing the turnaround in performance in our branded Cakes business and recovering higher wheat costs.”