Premier Foods: announces preliminary results 2012

London / UK. (pf) Premier Foods PLC announces its preliminary results for the year ended 31 December 2012, demonstrating the Company´s continued delivery against the strategic priorities it set out at the beginning of the year. Gavin Darby, Chief Executive Officer of Premier Foods, commented: «Premier Foods has many strengths and great potential. The management team did a great job in 2012 to lay the foundations for future growth and I am very excited to be working with them to develop and grow our Power Brands in the coming years. It is important now to maintain continuity and focus on executing our existing strategies to build further momentum in Grocery while re-building value in Bread». Summary:

  • Underlying sales, excluding Milling, up 3,2 percent
  • Power Brand sales up 2,1 percent
  • Grocery Power Brand sales up 4,0 percent, delivering four successive quarters´ growth
  • Underlying business Trading profit up 10,6 percent to 123,4 million GBP
  • Operating profit 96,3 million GBP
  • Planned disposal target exceeded by 40 million GBP and 20 months early
  • Cost reduction programme delivered 48 million GBP savings to date, ahead of plan
  • Net debt reduced to 950,7 million GBP

Commenting on 2012 results, Mark Moran, Chief Financial Officer, said: «In 2012 we delivered against all of our strategic priorities – reducing Net debt levels, significantly reducing costs, building more collaborative customer partnerships and generating growth in our Power Brands. While it is clear that markets will remain challenging in 2013, we believe we have the right strategies in place, including the delivery of further overhead cost savings, to make further progress this year».

Bread division (only)

The complete news release is available on the company´s web server.

Sales for the Bread division excluding Milling declined 0,7 percent to 497,1 million GBP in the year while total sales for the division decreased by 0,7 percent to 688,5 million GBP. Divisional contribution declined by 24,8 million GBP to 26,9 million GBP in the year.

During the year, Hovis maintained its value market share in a highly competitive market, where promotional activity levels remain high.

However, changes in the customer and product mix during the course of the year, as a result of a number of contract gains and losses, have adversely impacted Divisional contribution. Additionally, some of the contract gains require higher costs to serve. Continued collaboration with our retail customers in 2013 is expected to result in an improved mix impact year on year.

Adverse wheat quality following the worst harvest for 35 years also affected manufacturing efficiencies and negatively impacted Divisional contribution in the second half of the year. Price increases were achieved in the Baking and Milling businesses in the third quarter of 2012 to offset wheat price inflation following the lower quality harvest seen during the year and while the Company has taken the decision to diversify its sources of wheat in the short-term, it remains committed to supporting British farming.

As previously announced, the Company will lose a branded and non-branded bread contract with a retail customer in the second quarter of 2013, equivalent to approximately 75,0 million GBP of annual sales. The lost volume and margin from this contract is expected to be offset by manufacturing and distribution cost savings from the previously announced closures of the Birmingham, Greenford and Eastleigh bakeries and distribution centres at Mendlesham and Plymouth. Additionally, the Company recently announced the proposed closure of its Glasgow Mill to optimise capacity in its Milling business in light of reduced volumes. As previously announced, the cash costs associated with this restructuring are expected to be approximately 28 million GBP in 2013.

Milling sales were 191,4 million GBP in 2012, down 0,9 percent compared to the prior year, while margins were also affected by the lower wheat quality from the 2012 harvest.

In 2013, the Company plans to re-build value in its Bread division through focusing on reducing costs to serve, improving profitability and targeting capital investment to enhance flexibility, efficiency and customer service.

Outlook

In 2012, the Company delivered its strategic priorities to stabilise the business, re-focus the portfolio and invest in its future growth. Growth momentum was generated behind the Company´s Grocery Power Brands and strategic decisions were taken to re-build value in Bread. While markets are expected to remain challenging in 2013, the Company believes the right strategies and plans are in place, including the delivery of further cost savings, to make progress in 2013.