Premier Foods Lowers Outlook Again as Price Negotiations Drag

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LONDON-Premier Foods PLC (PFD.LN) shares plunged by 16% early Wednesday on the back of a profit warning.

The company said six out of its eight major brands gained volume and market share, while its worldwide business grew 15 per cent, its ninth consecutive quarter of growth.

Premier Foods plc, the United Kingdom group behind brands including Mr Kipling cakes and Ambrosia custard, today (18 January) warned annual profits could be 10% lower than it expected, in part due to its struggles in passing on Brexit-linked cost increases. In the year ended April 2, 2016, the company made a trading profit of 131 million pounds ($160 million).

The food manufacturer, whose brands range from Bisto to Mr Kipling and 80s stalwart Angel Delight, said sales in its third quarter were down one per cent at £251.4m, despite a strong December.

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This pressure is coming at a time when the group said it was "experiencing material inflation" in costs of many of its raw materials, "notably in commodities such as sugar, chocolate, dairy, wheat and palm oil". "We now expect category performance to remain challenging during the fourth quarter and as a result, sales will be below previous expectations", CEO Gavin Darby said in a statement accompanying the results.

Premier's shares have been under pressure after a hard 2016 for the group, with its management under fire over its rejection of takeover advances from Schwartz spice USA owner McCormick & Company, commodity price rises and a knock to sales from warmer-than-expected autumn weather.

Total sales in Premier Foods Grocery business were were 1.9% lower as strong non-branded sales +13.0% were offset by weaker branded sales, down 3.8% in the quarter, the company said. Following strong performances in Mr Kipling and Cadbury cakes sales in Australia, global sales increased 15%.

Premier Foods said it was "working collaboratively with customers to agree these changes and are confident that appropriate settlements will be reached".

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