UPDATE 1-Premier Foods sees 2013 profit at top end of forecasts

Tue Jul 23, 2013 4:19am EDT

* H1 trading profit up 50 pct to 47.4 million pounds

* Shares up 6.5 pct

By Neil Maidment

LONDON, July 23 (Reuters) - Premier Foods, the maker of Mr Kipling cakes and Hovis bread, said it expected full-year results to be at the top end of forecasts after cost cuts helped the group to report a 50 percent leap in first-half trading profit.

The British food producer also said on Tuesday it expected full-year free cash flow to be between 50 and 70 million pounds, slightly higher than earlier estimates, which would help reduce year-end net debt to 840-860 million pounds ($1.32 billion) from 890 mln at the end of June.

Shares in the firm rose 6.5 percent to 90.7 pence in early trading.

"This is a great result for Premier, make no mistake," Investec analyst Martin Deboo said, describing the first-half result as very strong.

After refinancing and selling assets last year to help reduce debt built up before the financial crisis, Premier Foods is stepping up marketing for its eight best-selling brands, such as Batchelors, Ambrosia and Bisto gravy. It is also shaking up its bread unit to improve profitability.

"A 50 percent increase in trading profit is a very encouraging result given the highly competitive environment," Chief Executive Gavin Darby said.

The group said the restructuring of its bread division was ahead of plan. At a cost of 28 million pounds, the shake-up includes bakery closures and job cuts to reduce capacity.

Group underlying trading profit jumped to 47.4 million pounds in the six months to June 30, Premier Foods said, benefiting from cost savings made last year and another 20 million pounds worth delivered in the period.

The firm said plans to halve its 3,299 suppliers would deliver a further 10 million pounds of savings in the second half of the year and help push annual trading profit to around 146 million pounds - the top of market expectations.

Total underlying sales fell 0.9 percent, with a 3.2 percent rise in best-selling brands offset by a 5.1 percent fall in lower-margin products.

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