The company, which owns brands including Branston, Bisto and Hovis, also said volumes were down 3.8% for the three months to March 31. It suggested consumers and retailers had stocked up during the cold snap in December, leading to a weak January and February.
In March, the market volume decline slowed to 1.6%, nearer to the 2010 average levels, Premier said. The company also reported that raw material inflation year-on-year was running at a percentage rate in the low teens.
Premier also said in its statement that it had achieved all the re-pricing required to cover the inflation seen up to the end of the first quarter; further price rises are being negotiated to cover further inflation.
Premier Foods has been selling businesses to bring down its debt. It sold its canned food and meat-free businesses this year for a combined sum of £387m, helping it bring down its debt to under £880m.
Management change overdue
One analyst said: “We are surprised that Schofield is still there. It would not be a surprise to us if a change of management was announced, it is long overdue. Chief operating officer Tim Kelly is the frontrunner as a potential replacement on the bush telegraph.”
However, a spokesman for Premier refused to be drawn on city rumours that Premier is looking for a replacement for its Schofield. “There are no moves afoot that I have heard of,” he told FoodManufacture.co.uk
‘First half profit warning’?
Meanwhile, analyst Clive Black of Shore Capital said that the interim statement was “effectively a first half profit warning” as Premier had said that its profit delivery for the year would be weighted towards the second half.
Black remarked: “The update is undeniably poor. In Premier’s defence, you can’t subtract the company from the impact of market conditions. It was a very challenging quarter. Premier is working hard to get price recovery, when having more expensive products may not be judicious in the current economic environment and perhaps it should focus on volumes.”
He added that Premier Foods was a more robust organisation from a financial perspective following the disposal of the canning and meat-free businesses. “However, we have also harboured concerns about the strength of the residual business and we believe that our caution has again been vindicated today.”
Tough year predicted
Another analyst commented: “It’s not been a great start to the year for Premier, but these results were in line with expectations. We would expect trends to improve in the next quarter. However the recent warm weather was probably not good news for their business. I think Premier is going to have a tough year.”
Asset management specialist Investec said: “Sales continue to decline – by as much as 9% in the branded grocery core – while raw material costs continue to rise. Full year guidance of 'progress' is being maintained but will be second-half weighted. We continue to think that Premier is going to struggle to deliver this and maintain our below-consensus forecasts and Hold recommendation.”
Shares in Premier Foods were trading at 30.25 pence after the statement was issued, a fraction of the 300 pence they hit in 2007 and valuing the business at £725.4m, below the level of its debt.
Reporting on the figures, Schofield said: "During a difficult Q1 trading period, we have continued to execute our strategy. With improved efficiency, we are in a good position to compete in an increasingly competitive marketplace.”