18th Jun 2014 06:46
LONDON (Alliance News) - Premier Foods PLC Wednesday warned that sales of its so-called power brands are expected to have fallen in the second quarter of the year, and will no longer meet the growth expectations set for the full year, but the company said it is retaining its overall profit expectations for 2014 because it will offset the shortfall with cost control.
In a statement, the owner of brands including Ambrosia custard, Bisto gravy granules, Sharwood's sauces and Mr Kipling cakes said it no longer expects sales of its power brands to grow 2% to 3% in 2014 due to "subdued" grocery markets. It didn't give a new forecast.
"Profit expectations for the twelve months to 31 December 2014 remain unchanged, reflecting the company's ongoing focus on managing its costs," it said in a statement.
The company grocery power brands are eight brands that it expects to be its key growth drivers going forward. They include Bisto, Oxo, Sharwoods, Mr Kipling and Ambrosia.
Premier Foods is going through a transformation after being saddled in recent years by a massive debt pile and rising interest costs, and as some of its diverse range of food businesses underperformed. In the past two years, it has restructured its milling unit and sold other non-performing business such as sweet pickles, table sauces, jellies and sweet spreads.
Wednesday, it also said it will create a joint venture called Knighton Foods with Specialty Powders Holdings Ltd, to manufacture powdered beverages and desserts.
Specialty Powders Holdings will own 51% of the JV, putting its Phoenix Foods and Agglomeration Technology businesses into it. Premier Foods will own the remaining 49%, contributing the Knighton site and assets other than the two production lines that will be transferred to Premier Foods' site in Ashford. Premier will also put in its private label and business-to-business sales of powdered beverages and desserts.
The joint venture will be led by Mike Kirby, current majority shareholder and managing director of Specialty Powders. Premier Foods and Specialty Powders will each nominate three directors to the board of the joint venture.
Premier said it will book cash restructuring costs of about GBP4 million in 2014 as a result of the joint venture deal. It will also put in GBP1 million of capital expenditure, although this figure is already included in its current capex plans.
Additionally, Premier Foods said it has now completed the consolidation of its logistics network, a move that is expected remove about 750,000 road miles from the network by the end of this year. It is cutting the number of third party-operated grocery logistics sites from three national distribution centres to two regional distribution centres based in Lancashire and Northamptonshire.
"The resulting significant reduction in logistics and distribution costs is expected to offset the impact of excess warehouse capacity arising from Premier Foods' previous disposal programme," it said in a statement.
By Steve McGrath; [email protected]; @SteveMcGrath1
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