Daily Management Review

Premier Food’s ‘Performance To Remain Challenging During The Fourth Quarter’


Profit prediction drags down Premier Food’s shares.

The shares of Premier Foods tanked following its announcement wherein it predicted that the “trading profit” will be ten percent below its previous year’s performance figures. The said anticipation took birth by the “weaker-than-expected third-quarter sales and higher costs”. Moreover, it also revealed a “cost saving and efficiency programme”.
The brands’ owner like “Mr Kipling and Bisto” said that the drop of one percent on the third quarter’s sale in comparison to its respective previous year’s figures, while “branded sales” came down by “3.8%” whereas “non-branded” soared up by “11.6%”. While Digitallook reported that:
“Premier, which confirmed last week that it was in talks with supermarkets Tesco, Sainsbury’s and Asda about hiking its prices, also announced the start of a three-year cost reduction and efficiency programme. It is expected to deliver incremental cost savings of £10m from FY17/18, with equivalent further savings the year after”.
In the words of the Chief Executive Officer of Premier, Gavin Darby:
“Sales in our third quarter were weaker than expected despite a strong December. 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. Consequently, we now expect trading profit for FY16/17 to be approximately 10% below previous expectations.”
“Six out of eight of our major brands gained volume and value market share in the quarter although our categories were generally softer due to changes in retailer promotion strategies. Our international business delivered a ninth consecutive quarter of growth, up 15%.”
In response, Shore Capital took a downgraded stance “on the stock to ‘sell’ from ‘hold’”, while it tentatively it reduced its “trading profit forecast by 10% to £118.3m” which leads to a reduction of around fifteen percent, whereby brining the “pre-tax profit estimate to £73.8m”.