Premier Foods: Branded Sales Momentum Continues

London / UK. (pf) Premier Foods PLC, Britain´s biggest food manufacturer, which also owns Branston, Mr Kipling and Sharwood´s, said sales of Hovis had jumped 22 percent in the third quarter 2009. The bread brand´s market share increased from 22,8 percent last year to a new high of 26,2 percent – the company said in an interim management statement for the 13 weeks to 26 September. Summary:

• Total Branded sales up six percent in third quarter reflecting volume growth.
• UK Grocery branded sales up four percent in third quarter.
• Sales of Hovis branded bread up 22 percent in third quarter.
• Group sales excluding bulk flour up two percent in third quarter (up five percent in first nine months).
• Group sales up one percent in third quarter (up three percent in first nine months).
• Expectations for the full year remain unchanged.

CEO Robert Schofield: «We are pleased by the progress that the business has made in a tough trading environment. Our brands continue to perform well; across the Group their growth rate has increased from five percent in the first half to six percent in the third quarter as volume growth has accelerated. We have also exited some low margin retailer brand contracts, which, whilst reducing overall sales growth, has improved our branded mix.

Additionally, our brands have continued to take market share through a combination of innovation and advertising, supported by strong promotional campaigns. Hovis has consolidated its market share gains and the division is now benefiting from the branded sales growth achieved over the last year.

I am pleased to welcome Jim Smart to Premier Foods as Group Finance Director. His wide experience will prove invaluable to the Group.

As we enter the important Christmas trading period, in what is a competitive environment, we remain confident of achieving adjusted profit before tax for the full year within the range of market expectations».

Introduction

Group sales, excluding bulk flour, were two percent ahead in the third quarter and five percent ahead in the first nine months, compared to the prior year. Total Group sales increased one percent in the period and three percent in the first nine months. The brands continue to perform well; across the Group their year-on-year sales growth rate increased from five percent in the first half to six percent in the third quarter as branded volume growth accelerated. Retailer brand sales were down eight percent in the quarter, primarily due to lower sales of bread and bulk flour. Overall sales volume and mix for the Group was flat with the increased branded volumes being offset by the lower volumes of retailer brand products. In line with the stated strategy of focusing on branded growth, the branded mix of Group sales increased by two percentage points to 63 percent.

Grocery

Sales for the Grocery division for the third quarter were two percent ahead of the same period last year and five percent ahead in the first nine months. In the UK, branded sales were up four percent against the third quarter last year primarily due to increased volumes as we continued to support the brands. However, following the exit from a number of low margin retailer brand contracts in the quarter, overall volumes for the UK were flat year-on-year. The higher level of sales growth due to price rises seen in the first half of the year has moderated in the third quarter as the company cycled the price rises achieved in 2008.

As previously reported, the grocery market in Ireland has been difficult this year. Sales for the business in Ireland in the third quarter were 14 percent below the same period in 2008.

Hovis

Sales of Hovis branded bread for the third quarter were up 22 percent on the same period last year. The company saw a significant decrease in retailer brand bread volumes as it elected to exit certain unprofitable contracts during the period. As a result, total sales in the baking business increased by three percent in the third quarter. The branded mix of the baking business showed a significant improvement with 72 percent of sales now branded, up from 63 percent in the same period last year.

Bulk flour sales declined due to lower wheat and wheat feed prices. Consequently total sales for the division for the third quarter were two percent lower than the same period last year.

Hovis has maintained its strong market share performance through the third quarter, reaching 26,2 percent for the twelve weeks ending 05 September 2009, compared to 22,8 percent for the equivalent period last year. Investment in the Hovis brand continues with the recent introduction of a new Farmhouse soft white loaf. The company is also pleased to be supporting The Royal British Legion´s Poppy Appeal this year through sales of Hovis Seed Sensations.

Chilled

In the Chilled business, sales for the third quarter increased by one percent on the comparable period in 2008, with sales for the first nine months up by five percent. Sales growth of Quorn improved in the period, although profitability was held back by the previously reported additional manufacturing costs, which are being addressed. The retailer brand chilled ready meal and cake business is trading in line with the expectations.

Transformation Programme

The transformation programme following the acquisitions of Campbell´s and RHM is now substantially complete although a small level of investment remains as the company continues to improve operational efficiencies in the manufacturing sites and expands the scope of the new Group shared service centre.

Financial Position

The financial position is broadly unchanged since the half year aside from normal trading cash flows. The company expects good cash generation in the second half reflecting the typical seasonality of its business. The company continues to focus on cash generation to reduce net debt.

Trading Outlook

As Premier Foods PLC enters the important Christmas period, in what is a competitive environment, the company believes its brands are well placed to continue to benefit from the coordinated programmes of innovation, advertising and promotional activity that have driven growth this year. The group remains confident of achieving adjusted profit before tax for the full year within the range of market expectations.