Profit warning and cost-cutting plan from Premier

The firm said it is now preparing to slash costs in a bid to keep prices down
The firm said it is now preparing to slash costs in a bid to keep prices down

Mr Kipling cakes firm Premier Foods has warned over full-year profits after falling sales and as it battles to offset soaring costs of ingredients.

The group, which also owns a raft of household brands including Oxo and Batchelors, said profits are now set to be around 10% lower than expected and unveiled a “substantial” three-year cost-cutting plan.

Premier, which last week confirmed it was in talks with supermarket giants and retailers over price hikes, said negotiations were taking longer than expected as it looks to recover surging costs of commodities such as sugar, chocolate, dairy, wheat and palm oil.

It added that group sales fell by 1% in its third quarter despite strong December trading.

Premier will now slash costs in the face of cost and trading pressures, focusing on making savings throughout its supply chain, particularly in warehousing and distribution.

Group sales rose 4.5% in December thanks to strong festive demand for Bisto, Oxo, Loyd Grossman products, Ambrosia and Batchelors, but this was not enough to offset tougher trading earlier in the quarter.

Branded product sales fell 3.8% in the quarter to December 31, with the group blaming major retailers’ moves to axe multi-buy promotions.

Gavin Darby, chief executive of Premier, said: “We now expect category performance to remain challenging during the fourth quarter and as a result sales will be below previous expectations.

“Additionally, recovery of significant input cost inflation in certain areas is taking longer than originally foreseen.”