Premier Foods profit edges up in tough market

LONDON, July 22 Tue Jul 22, 2014 2:54am EDT

LONDON, July 22 (Reuters) - Premier Foods, the British maker of Mr Kipling cakes and Bisto gravy, posted a 2.1 percent rise in first half trading profit, though its sales fell, reflecting a tough market for its supermarket customers.

The company, which last month cut annual sales growth forecasts at its key brands due to Britain's gloomy grocery market, said on Tuesday it was maintaining its trading profit expectations for the full year.

Premier Foods' underlying trading profit for the six months to June 30 was 48.1 million pounds ($82.1 million), up from 47.1 million pounds in the same period last year.

But its sales fell 6.1 percent to 364.4 million pounds, with its core higher-margin 'power brands' such Bisto, Mr Kipling, Batchelors soup and Ambrosia custard, down 4.9 percent to 240.8 million pounds.

Lower volumes were offset in part by a raft of cuts to manufacturing and procurement costs.

The retailers who sell Premier Foods products are facing the slowest rate of growth in Britain's grocery market since 2005, illustrated by a profit warning from market leader Tesco on Monday.

"We are adapting quickly to the changing external environment through retaining a tight control of costs and margins and have a strong programme of consumer marketing and new product introductions planned for the second half of the year," said Chief Executive Gavin Darby.

"Assuming normal weather patterns, we expect an improved second half branded sales performance and our trading profit expectations for the year remain unchanged."

Darby added the firm remained convinced of the medium and long-term potential for its brands to deliver profitable growth.

Shares in the firm closed at 46.5 pence on Monday, down 14 percent on a year ago, valuing the group at 383 million pounds.

($1 = 0.5856 British Pounds) (Reporting by Neil Maidment; Editing by James Davey)

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