Premier says profit meeting forecasts

Premier Foods, the UK’s second-largest bread baker, said profit is meeting forecasts on increased bread prices and demand for a new loaf made under the Hovis brand.

The company said its sales in Ireland were up 2 per cent during the first four months of the year lifted by a strong growth in sale of Quorn, which off-set lower sales of branded goods. Quorn is a protein rich food, often used a substitute for meat.

Premier's brands in the Republic include Campbells, Oxo, and McDonnells. Last year Premier agreed to sell Erin, its largest retail brand in the Republic, to facilitate its purchase of RHM.

In its statement today Premier said it remained on track to deliver £113 million of cost savings following the acquisition of RHM and Campbell's. It said plans to close the seven remaining factories under the manufacturing integration were progressing well.

In Ireland RHM's principal brands are Sharwoods, Paxo, Saxa, Bisto and McDougalls.

Premier said sales rose 6.3 per cent over the first 17 weeks of the year and said price increases were meeting the costs associated with commodity price inflation.

The forecast applied to operating profit from continuing activities. The baker raised bread prices in September and October to recoup higher expenses for wheat, whose cost has jumped by about 75 per cent over the past year.

Following the acquisition of RHM in 2007 Premier gets about a quarter of its sales from bread. Cost inflation this year is in line with managers' forecast, said Premier. The company said it would "closely monitor energy and oil-related costs".

Four-month sales rose 14 per cent from a year earlier at Premier's baking and milling unit, and the amount of Hovis sold was more stable, the statement said.

The company said in November it was selling less bread because rivals had waited before following the prior month's price increase.

Improved bread recipes and packaging are being developed for Hovis along with new
marketing as part of an effort to revive the brand that will take place in the second half of the year, Premier said.
Hovis's market share dipped in last year's first half after competitor Associated British Foods reintroduced its Kingsmill bread.

Additional reporting Bloomberg