24th Apr 2014 08:36
LONDON (Alliance News) - Premier Foods PLC Thursday said trading in the first quarter was soft as sales declined by 6.2%, but said its trading expectations for the full year remain unchanged, as it has a strong programme of additional new product launches planned for the second half of the year.
The owner of brands including Ambrosia custard, Bisto gravy granules, Sharwood's sauces and Mr Kipling cakes reported total sales of GBP186.3 million for the three months to March 31, down 6.2% when compared with GBP198.7 million the prior year.
"As expected, we had a softer first quarter due to the subdued grocery retail environment, a later Easter and the impact of milder weather," said Chief Executive Officer Gavin Darby in a statement.
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.
This year, it has spun off its Hovis bread business into a joint venture and has revamped its capital structure, which it completed during the first quarter.
"While trading conditions are expected to remain challenging, we have a strong programme of new product launches and consumer marketing planned for the second half of the year building on our enhanced customer partnerships with retailers and supported by continuing initiatives to reduce costs, complexity and improve efficiency," said Darby in a statement.
Premier Foods said total grocery sales were down 6.2% in the period, as sales of its so-called grocery Power brands - those it expects to be its key growth drivers going forward - fell by 3.5%, as well as reporting lower Support brands and Non-Branded sales.
The group said Support brands sales fell by 10% in the first quarter, which it said was largely due to lower sales of its Cadbury cakes due to the late timing of Easter.
"Plans are in place to help reverse this decline during the remainder of the year focusing on new Cadbury product launches and support for Homepride cooking sauces following the recent re-launch with refreshed and more contemporary flavours and packaging," the company said in a statement.
Non-Branded sales were down 13%, due to contract withdrawals in lower margin desserts and powdered beverage contracts, it said.
Premier Foods said its Power brands were hit by increased discounting, especially for cooking sauces like Sharwood's.
Mr Kipling cakes on the other hand increased its market share position in the quarter, it said, with further brand activity planned for the rest of the year.
"The company's major investment in the new Mr. Kipling Snackpack line at its factory in Barnsley is also developing well, with production expected to commence in early 2015," it said.
Premier Foods said its branded mix of sales increased to 89.4% in the quarter from 88.6%, while grocery gross margins were up in the quarter compared to the prior year.
The group has been focusing on reducing the number of suppliers it uses as one of its cost-efficiency initiatives, and said it has now reduced the number of suppliers by over 38% since the beginning of 2013 to 2,040. It said it is on track to meet its supplier numbers target of 1,660 by the end of 2014.
"The product code reduction programme is also progressing well and in line with plan; we expect to have taken out 700 product codes by the end of 2014, representing a 41% reduction since the start of this programme," the company said.
During the quarter, Premier Foods decided to spin its bread business off into a stand-alone joint venture with The Gores Group, a move it hopes will significantly increase investment in the bread business and reinvigorate the Hovis brand. Premier Foods will retain a 49% holding in Hovis Holdings Ltd.
"This year, the bread business has focused on a major restructuring programme, involving the closure of three bakeries, two mills and a significantly reconfigured logistics network," the company said in a statement back in January.
Premier Foods shares were down 2.1% at 62.18 pence per share Wednesday morning.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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