Premier’s second quarter results disappoint analysts

- Last updated on GMT

Premier's seasonings business has not been performing as expected
Premier's seasonings business has not been performing as expected

Related tags: Powder, Marketing

Premier Foods continues to be in the news, having just reported disappointing second quarter sales for its all-important ‘power brands’ together with a joint venture (jv) for its powder activities.

City analysts Clive Black and Darren Shirley at stockbroker Shore Capital remarked that sales of Premier Foods’s power brands were no longer forecast to grow by the previously anticipated 2–3%, with weak sales expected to continue for the company’s flavours and seasoning, gravies and stocks.

Profit expectations

Because of its continuing focus on making productivity and efficiency improvements, however, Black and Shirley predicted Premier's profit expectations for the 2014 financial year would remain unchanged from earlier projections.

Cost reduction was expected to be assisted by the new Knighton Foods jv with Speciality Powders Holdings to manufacture powdered beverages and desserts.

The jv will involve the transfer of around £16M of own-label and business-to-business sales from Premier to the new venture.

At the same time, Premier’s Brown & Polson home baking ingredients business would be licensed to Knighton Foods for five years, with a call option to purchase the brand for £2.75M.

Cost savings

The jv will combine dry powder manufacturing at the Knighton site, allowing for cost savings for both parties, so enabling the transfer of two lines from Knighton to Premier's Ashford facility, where site productivity should be enhanced, said the analysts.

Premier has also announced the completion of consolidation of its third-party logistics sites from three national distribution centres to two regional distribution centres, leading to speedier and more effective fulfilment.

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