Premier Foods to sell frozen foods division

By Karen Willmer

- Last updated on GMT

Related tags: Sales, Premier foods

Premier Foods will sell its frozen foods division, according
to a trading update released today.

The company said the plan was due to the sector's poor performance and forms part of its reorganisation strategies to simplify its business and boost profit margins. The report said like-for-like sales will be slightly behind last year due to the struggling frozen foods division, as well as the costs associated with the loss of some own label contracts. "We have returned investment in the business to more normal levels and, as a consequence, trading profit for the first six months of 2007 will be below that for the comparable period in 2006,"​ the company stated. The report also highlighted the reorganisation of its cakes division, closing the head office in Windsor in early 2008, sales of the van sales operation, and separate integrations of the Manor Bakeries and Avana Cakes businesses. The acquisition strategy highlights Premier's attempt to achieve savings throughout its business as higher commodity costs cut into the company's margins. The company plans to increase the price of its bread in a bid to keep margins. The company also said it has "planned significant activity"​ for Hovis in the second half, launching a new seeded loaf and specific TV advertising for the 'Best of Both' bread. The strategy is due to the wheat prices and the "impact of competitor promotional activity",​ the company said. Premier said the acquisition of Campbell's will mean sales of convenience foods, pickles, sauces and meat-free products will be ahead of the first half of 2006. However, like-for-like sales are likely to be slightly behind the £225m for the same period in 2006. The fall would be due to the lower sales of branded beans and own label convenience foods. However, the company is "pleased" by the continued strong growth of Branston pickles and Loyd Grossman sauces, and has invested £35m into the Belasis factory to support the growth it anticipates from Quorn. It also reported sales of spreads, desserts and beverages to be lower in this period compared to the £141m of the same period last year due to the end of the Cadbury chocolate beverages licence in May 2006. Sales for the culinary brands are also expected to be behind, which it says is due to softer trading in the first four months of this year. Premier's sales reached £2.7bn (€4bn) in 2006 and the top ten brands have retail sales of £1.2bn (1.6bn). The company announced last week the closure of six of its 11 factories in order to cut manufacturing costs, resulting in the loss of 900 jobs. It also said group sales had been "particularly affected" by the hot weather in April, but performance had improved now there was a return to a more "normal British summer", from which it expects to see branded growth in the second half. Premier Foods recently completed its £460m (€682m) acquisition of Campbell's soup, as well as the £1.2bn (€1.8bn) takeover of Hovis maker RHM. "We are delighted by the performance of theCampbell's business where we have arrested the 4 per cent decline in sales seen at the time of acquisition and have moved the business into growth."​It said Campbell's profits were higher in the year prior to the acquisition due to the significant reduction in expenditure on marketing. Premier expects to save £85m (€125m) from the RHM acquisition and £28m (€41m) from Campbell's. It hoped sales for the Group for the first half of 2007 will be higher than the same period in 2006 due to the Campbell's and RHM acquisitions. "Our priority continues to be growing our business and our brands, and to do this we need to remain competitive in the market place,"​ Robert Schofield, Premier's chief executive said last week. The company produces Hovis bread, Mr Kipling cakes, Sharwoods Asian foods, Oxo stock cubes, Batchelor's soups and noodles, Loyd Grossman sauces, Bisto gravy, Quorn meat-free products, Ambrosia custard and rice pudding, Branston pickle and Hartley's jams and marmalades and jelly.

Related topics: Markets, Premier Foods

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