LONDON--Premier Foods PLC (PFD.LN), known for household foods
such as Bisto gravy and Kipling cakes, said Wednesday it was
unlikely to meet its 2014 sales targets for its top brands, an
announcement that sliced almost 10% off its share price.
The company had previously announced that this year's sales of
its top brands--others include the Oxo flavoring range, and
Sharwood's Asian cuisine range--were expected to grow by 2% to 3%.
It expects these sales for the second quarter to be down on the
year-ago period and below expectations.
At 1204 GMT, shares of the British food maker were trading
around 8% lower at 53 pence.
Premier Foods blamed "subdued grocery markets" for the drop in
its sales growth forecasts, but said profit expectations for the
year remain unchanged due to ongoing cost control initiatives.
The U.K. grocery market grew barely by 1.7% for the for the 12
weeks ended May 25--the lowest level for at least 11 years,
according to data published on June 3 by Kantar Worldpanel, amid a
price war fought between supermarket chains.
The "big four" U.K. supermarkets--Tesco PLC, J Sainsbury PLC,
Wm. Morrison Supermarkets PLC and Asda Stores, a unit of Wal-Mart
Stores Inc.--have struggled in recent years to compete with
discount chains such as Aldi Stores Ltd. and Lidl U.K. GmbH. The
contest has forced the larger companies to reduce prices to retain
customers, and that has applied pressure down the supply chain on
food manufacturers like Premier Foods.
Despite the company's disappointing trading update, Shore
Capital analyst Clive Black has reiterated a "buy" rating and 54
pence target price.
"Whilst the stock trades at a heavy discount, the weak trading
momentum is a disappointment and a worry, and despite good
engineering of the group, there is a fundamental need for trading
to improve for the share price to materially appreciate in our
view; a prospect that we harbor some hopes on," Mr. Black said.
Premier Foods also announced Wednesday a joint venture with
Specialty Powders Holdings Ltd., a processor of dry powder food
products, to produce powdered beverages and desserts in a drive to
improve its manufacturing capability. The new joint venture will be
named Knighton Foods and will combine manufacturing capabilities
from both companies at Premier's Knighton factory in Staffordshire,
England.
Earlier in 2014, the company sold a 51% stake in its Hovis bread
business to U.S. private-equity firm Gores Group and unveiled a
radical 1.13 billion pounds ($1.92 billion) capital refinancing
plan to reduce its debt and focus on key brands.
-Write to Tapan Panchal at tapan.panchal@wsj.com
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