Premier Foods: dives into red and slashes payout

London / UK. (wib) Premier Foods slashed its final dividend and began rescheduling its massive 1,6 billion GBP debt as a result of soaring wheat prices. Great Britain´s biggest food maker said it needed to «increase its financial headroom» due to unprecedented food inflation and general economic uncertainty. Premier Foods posted a 73,5 million GBP pre-tax loss for 2007, compared to a profit the year before of 59 million GBP.

The group´s debt levels largely result from the 1,2 billion GBP acquisition of Mr Kipling and Hovis firm RHM last year, and its 450 million GBP deal for the UK arm of Oxo and Homepride company Campbell´s Soup in 2006. The deals saw Premier Food´s net interest payments rocket to 149,6 million GBP last year, compared to 41,5 million GBP in 2006.

The group´s bakeries division, which now contributes more than a third of the group´s 2,2 billion GBP sales, was the worst-hit section of the business as the cost of wheat reached record highs. Sales volumes of Hovis also declined as the group raised prices towards the end of last year before its major competitors such as North-based Warburton´s.

Price pressure has continued this year with wheat prices breaking the twelve USD a bushel mark. Costs have surged in response to worries that global supply will be unable to cope with growing demand. Premier Food´s share of the bread market has also come under attack from Great Britain´s biggest baker Warburton´s, several sources say.