Premier Foods loses £75M bread contract

The firm said: “Following a recent business review, and consistent with its approach to improving sustainable profitability in bread, the company will be unable to renew a bread contract it holds with a retail customer with effect from mid 2013. ​

“This contract loss accounts for approximately £75m annual sales, has very low margins, is costly to service and will not affect 2012 performance.”​

Rising wheat costs are adding to the pressure on Premier's bread business.

Ebb and flow​

Panmure Gordon analyst Damian McNeela  said: “​There is a degree of ebb and flow to the non-branded bread business and although the margins associated with the lost contract are low it is a larger than average contract and hence the company have disclosed it.”​

Martin Deboo, analyst with Investec Securities said: “While the contract is low margin, it will represent lost contribution. We expect this to be a further catalyst for more radical actions to realise value from bread.”​

Meanwhile, Premier Foods revealed a 2% rise in underlying sales​ in its management statement covering the three months to September 30.