Premier Foods on track and able to pass on price rises

By Matthew Scuffham

LONDON (Reuters) - Premier Foods (PFD.L) said on Tuesday it was on course to meet its profit expectations for the full year as it successfully managed to pass on price increases to customers.

Premier, which makes Hovis bread, Mr Kipling cakes, Branston pickle, and Oxo stock cubes, reported a 7 percent increase in group sales in the first half to June 28, with the majority of the rise from increases in prices rather than volumes.

The group, which cut its dividend and renegotiated its finances in March as it struggled with high commodity costs and the impact of the credit crunch, also said trading profit had been in line with the first half of 2007 when it made a profit of 120 million pounds.

"Our expectations for the year remain unchanged with progress weighted to the second half," Chief Executive Robert Schofield said.

Premier's products traditionally trade better in the second half covering the winter period. The consensus forecast for full year trading profit currently stands at 330 million pounds.

Schofield highlighted a "rejuvenated" performance from Hovis, where sales volumes have stabilised after a period where it lost market share to rival Warburtons. The Hovis white loaf has been repackaged with a new recipe and will be backed by a major marketing drive in the second half, he said.

The group said the integration of RHM and Campbell's, both acquired in 2007, had proceeded ahead of schedule, with five of the nine factories scheduled for closure already shut and the remaining four due to close in the second half.

Shares in Premier, which have fallen over 70 percent in the last year as the credit crunch raised concerns over the group's level of debt after the acquisitions of RHM and parts of Campbell's in 2007, were unchanged at 76-1/4 pence at 10:10 a.m.