FDBusiness.com

Michael Clarke, the new chief executive of Premier Foods, has warned that full year trading profit is likely to be below market expectations. Trading in the UK food manufacturing group’s third quarter illustrates that the consumer environment remains challenging. Premier’s grocery division will not meet last year’s profit in the second half as previously expected. The loss of volume and margin pressure in the Hovis bread business is likely to mean that the rate of profit decline year on year will accelerate in the second half. Brookes Avana’s trading is not improving as previously expected and the loss in the second half is likely to be similar to that in the first half.

Trading in the fourth quarter, in which Premier Foods traditionally makes half of its annual profit, will continue to be influential in determining the year end outturn. Nevertheless, based on third quarter trading performance, Premier now expects that full year trading profit will be below the range of market expectations, with the extent of the shortfall dependent on the Christmas trading period.

“I’ve covered a lot of ground during my first weeks with Premier Foods and am convinced that there are substantial opportunities here but there are also significant challenges that we have to overcome,” Michael Clarke comments: “While the current trading performance continues to be disappointing and significantly behind our expectations, we have already identified a number of steps to build a more profitable business. These include focusing on 8 ‘Power Brands’, strengthening our sales and marketing execution and reducing our cost structure.”

The food group is currently in discussions with its banks to revise its banking covenants and put in place refinancing facilities.