Premier Foods tumbles after warning over H1 trading profit

Shares in Premier Foods tumbled on Wednesday after it warned that first-half trading profit was likely to be slightly below the previous year and posted a drop in second-quarter sales due to warmer weather.

In a trading update for the 13 weeks to 1 October, the company said total group sales fell 5.4% from the same period last year to £172.5m. They were down 1.8% in the first half.

Although trading profit is expected to be down on the prior year, Premier said its profit expectations for the full year remain unchanged “due to the careful management of costs”.

Grocery sales were down 9.5% from the same period last year and 4% lower in the first half. The company said that while this performance was disappointing, the Grocery innovation programme in the first half has been well received, particularly the Ambrosia Deluxe range.

It was a brighter picture for the Sweet Treats division, which saw its sixth consecutive quarter of growth at 6.4%, as both the branded and non-branded businesses delivered increases from new products and new business wins respectively.

The International business also continued to make good progress, with sales up over 13% in the period and Cadbury cake ranges launched in the United Arab Emirates for the first time towards the end of the quarter.

Chief executive Gavin Darby said: “We are disappointed that our grocery business reported materially lower sales in the quarter due to warmer weather; particularly in September. However, our Sweet Treats and International businesses continued to demonstrate their strong momentum, delivering against our strategic priorities and growing over 6% and 13% respectively."

"We remain very confident in our strategic progress, our customer relationships are strong and we have an extensive new product innovation programme planned for the balance of the year. We expect group sales to grow between 2-4% in the second half of the year and our profit expectations for the full year remain unchanged."

Shore Capital said: “For us September was demonstrably warm, the apparel trade is testimony to that, but hardly frazzle country. As such the magnitude of the weakness of Premier's grocery division in the month takes us by surprise, noting as we do secondary data that did highlight softness in the category.

“As such, against a narrative of a step up in underlying trade from 1-2% to 2-4% post the McCormick shenanigans, this update is clearly unhelpful.”

At 1130 BST, Premier shares were down 14% to 44.99p.

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