Premier Foods shares slump 37% on profits warning
Shares in Britain's largest food manufacturer Premier Foods tumbled nearly 40 percent on Friday after the owner of Hovis bread unveiled a shock profits warning and blamed challenging trading conditions.
"Group results for the third quarter (are) significantly below our expectations," Premier Foods said in a trading update.
"Full year trading profit (is) expected to be below market expectations," it added, blaming a "challenging" and "intensely competitive" consumer environment.
In reaction, the firm's share price nosedived 37.25 percent to 6.28 pence in late morning deals on London's second-tier FTSE 250 index, which was 0.36 percent lower at 9,852.68 points.
Premier Foods added that it would slash costs and sell off a number of businesses to focus on eight so-called "power brands" in a bid to drive future growth.
The company, which also owns brands such as Ambrosia custard, Bisto gravy, Sharwood's cooking sauce and Batchelor's soup, also revealed that sales volumes fell 8 percent in the three months to September 30 from a year earlier.
Hovis volumes plunged 13.5 percent in the period and profit margins suffered because of fierce competition.
Premier, which is based in St. Albans, north of London, added that it was holding talks with lenders to prevent it from breaching debt agreements.
"While the current trading performance continues to be disappointing and significantly behind our expectations, we have already identified a number of steps to build a more profitable business," said chief executive Michael Clarke in the statement.
"These include focusing on eight Power Brands, strengthening our sales and marketing execution and reducing our cost structure.
"Our immediate priority is to conclude discussions with the banks to revise our banking covenants and put in place refinancing facilities.
"This process is well underway and we are hoping to reach a successful conclusion in due course."
Premier added that its full-year profits will depend on trading in the fourth quarter, when the group usually makes half of its annual profits.
© 2011 AFP