Premier Foods reveals debt progress

A slimmer Premier Foods revealed its debt mountain now stood below £1 billion as the maker of Mr Kipling cakes posted better-than-expected profits.

The UK’s biggest food manufacturer has recently sold its Quorn meat-free business and its canned grocery operation, including the Crosse & Blackwell brand, for a combined £387 million in order to cut its debt burden.

Premier’s shares rose by 8% as it said its net debt, which stood at £1.4 billion in June after a takeover binge in recent years, has been reduced to less than £900 million following the sell-off and through its own performance.

The St Albans-based company revealed a slight increase in trading profits to £311 million in 2010, whereas the City expected a drop of 3%. Sales fell 3.5% to £2.6 billion as supermarket-own label revenues declined.

Shares in Premier, whose other brands include Bisto, Ambrosia and Sharwood’s sauces, nearly halved in value in 2010 as investors were put off by debts built up in a buying spree that saw it snap up the likes of Hovis owner RHM.

Premier’s own-label bakery business Brookes Avana saw its profits collapse from £15 million to nothing in the year as it struggled to pass on price rises.

The group is in constructive dialogue with Brookes’ biggest customer Marks & Spencer about changing its pricing and bringing in new ranges.

Premier has been forced to put up prices throughout its business in the past year as it battled commodity price inflation.

Last year it was involved in a spat with Tesco which refused to stock some Hovis products due to price rises driven by the soaring cost of wheat.

Commodity prices are currently rising at mid-single digit rates, which Premier claims is “manageable” at that level.