Premier eyes further bakery price increases

By Karen Willmer

- Last updated on GMT

Related tags: Wheat prices, Bread, Baking

Premier Foods will further increase the price of its bakery
products if the cost of wheat remains high, the company said
yesterday in releasing its interim results.

In the six months to 30 June, sales decreased 1.1 per cent in the bread bakeries segment to £398.4m (€589m) compared to £402.8m (€595.8m) in the same period the previous year, while organic profit dropped 49.9 per cent to £19m. The company said the falls were due to higher wheat prices, increased distribution costs and a decline in the consumption of bread in the UK. "Wheat prices have seen an unprecedented level of increase over the last few weeks and we are pleased to have been able to implement price rises across our bread and flour products from the start of September,"​ said Premier Foods' chief executive, Robert Schofield. "If wheat prices remain at or above the current levels, then further increases in our bread and flour prices may be required." ​Premier Foods already announced last month that it will close two of its UK bakery plants due to lower demand for bread. The company said that these plans are in order to achieve savings throughout its business as higher commodity costs cut into the company's margins. Operating profit for the entire company was £52.2m for the six months, an increase of 23.1 per cent from the £42.4m in the same period the previous year. Premier said this was mainly due to its acquisitions of Cambell's in August 2006 and RHM in March 2006. The RHM acquisition added the bread bakeries, culinary brands, cakes and customer partnerships segments to the business. Sales within the cakes segment increased 8 per cent to £121.6m for the six months, which the company said was due to improved sales of branded and own label cakes. Total grocery sales decreased to £63.5m from £72.6m in the same period 2006. Sales in the convenience foods, pickles, sauces and meat-free segment of the grocery business decreased by £7.9m due to lower sales of branded baked beans and own label convenience foods. The company expects the launches of Branstein Beans with Omega 3 oils and Loyd Grossman sauces to improve the segment during the second half of 2007. Sales within the spreads, desserts and beverages segment of the grocery business decreased by 15.1 per cent to £117m, however the company hopes the spreads portfolio expansion following the RHM acquisition will help improve sales in the second half of 2007. "We have had a good start to trading for the second half where a combination of a strong programme of new product launches, improved promotional strategies across the enlarged group and cooler weather has helped to drive sales growth,"​ Schofield said. ​He said the Campbell's acquisition had gone smoothly, following its completion in April 2007, and the RHM integration is on schedule, with completion expected by the end of 2009. "We remain confident that we will deliver underlying sales growth for the year in line with our 1.5 - 2 per cent target,"​ he added.

Related topics: Premier Foods, Markets

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