In a stock exchange announcement issued following press reports that it was in talks with Nestlé about the sale of its meat-free division(Quorn and Cauldron Foods), Premier Foods said: “Discussions are proceeding and are at an advanced stage with two parties.”
Bosses would consider selling any part of the Premier Foods empire provided this did not diminish the capacity of the remaining business to repay debts and service its pension deficit, it reiterated.
“As stated at the time of its interim results on August 4, the board remains open-minded about disposals, provided they deliver shareholder value and accelerate the reduction of average net debt/EBITDA (earnings before interest, tax, depreciation and goodwill amortisation).”
Meat-free: Back in growth
Total meat-free sales were up 1.6% in the third quarter after a disappointing first half, a turnaround Premier Foods chief executive Robert Schofield (pictured) argued was encouraging given that the UK market for meat-free products was down 9.1% over the same period.
However, the meat-free division has struggled to realise its potential in recent years and Premier spent £3m last year and a further £1m in the first half of this year on "supply chain restructuring initiatives" to resolve "production inefficiencies" at its facility at Methwold in Norfolk, where Quorn is packed and the Cauldron meat-free range is manufactured.
Quorn sale no cure for Premier's woes?
However, offloading Quorn would not solve Premier’s financial woes overnight, stressed Shore Capital analyst Clive Black.
“Underlying trading profits are going backwards and we still question if there is much or anything in aggregate for equity shareholders after servicing c£1.5bn of debt and covering £3bn+ of pension liabilities.
“So, from a Premier perspective we hope that good value can be extracted for its beleaguered investors but Quorn alone does not represent the cure to push the company out of the corporate hospital.”
Premier gave no further update about the possible sale of its canning sites in Long Sutton and Wisbech.