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Premier foods needs to focus on Hovis to drive growth, analyst

By Helen Glaberson , 15-Feb-2011

Premier foods will need to focus on revitalizing the likes of Hovis to drive growth, leveraging prominent trends such as health and nostalgia said Datamonitor, as the company posted pre-tax loss from continuing businesses of £98m, versus a profit of £42m in 2009.

Premier Foods posted a 3.5 per cent drop in sales to £2.57bn, citing lower non branded product sales.

Mark Whalley, analyst at Datamonitor said, “The news that Premier Foods has posted a full-year loss paints a telling picture of the difficulties that food companies are currently enduring as a result of a rise in the price of raw ingredients and the continued fallout of the economic downturn.”

Whalley said concentrating on improving the standing of its flagship products would be key: “If it can do this, the company will be cautiously optimistic that it can restore the good times going forward, despite today’s news,” he said.

Despite posting an overall year sales loss, the £311m trading profit was higher than the expected £303m forecast by analysts, according to Reuters data.

Operating profits at the UK food giant rose by 0.6 per cent to £311m and branded sales volume were up 3.1 per cent.

Hovis boosts sales

Grocery saw profits edge forward 0.4 per cent from £255m to £256m, while Hovis managed a 26 per cent leap in profits to £39m.
Hovis achieved the jump in profits despite Rank Hovis hiking up its prices £89.37 to a tonne of flour last year.

Market analysts, Panmure, said the good performances in grocery and Hovis offset a “terrible year” at chilled ready meals division Brookes Avana, “shich we believe should be the next candidate for disposal."

Brookes Avana suffered a £15m fall in trading profit owing to lower volumes, lower prices, poorer mix and higher commodity costs, according to Premier Foods.

Reduced debt

The group’s net debt was down from £103m to £1,261m. After proceeds from the sale of Premier Foods' canning and meat-free divisions, the company said its debts will fall below £900m.

Whalley said the disposals would have hurt the manufacturer considering the potential of meat substitutes, but was viewed as ultimately necessary by Premier.

The company will need to show “considerable resilience” to restore profitability, the analyst added.

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