Shares in Premier Foods fell sharply in early trading on Wednesday, after weak third quarter sales led to the issuance of a profit warning.
Sales fell 1 percent in the third quarter of the year, despite an impressive 4.5 percent rise in the run-up to Christmas. The company expects the market to remain challenging for the fourth quarter, with trading profit expectations for the year approximately 10% lower than previously anticipated.
Premier Foods, the owners of household name brands including Mr Kipling, Bachelors and Bisto, have struggled to deal with the weakness of the pound pushing up prices. Next quarter sees the group starting a three-year cost cutting plan, which aims to make savings of £10 million by next year and maintain the company’s competitiveness in the market.
Gavin Darby, chief executive officer, commented:
“Six out of eight of our major brands gained volume and value market share in the quarter although our categories were generally softer due to changes in retailer promotion strategies. Our International business delivered a ninth consecutive quarter of growth, up 15 percent.”
“Against the backdrop of these headwinds, we are today initiating a new cost saving and efficiency programme which will deliver £10 million from 2017/18 with equivalent further savings the following year. This programme will support the Company’s twin goals of delivering Trading profit and free cash flow while investing in innovation and consumer marketing.”
Total sales in the grocery business fell 1.9 percent, as customers turned to non-branded products. Sales of Mr Kipling mince pies rose 17 percent in the Christmas trading period.
Premier Foods (LON:PFD) shares are currently down 15.62 percent at 40.50 (0930GMT).