Despite the company's attempts to flag its long-term prospects by forecasting an 8.4 per cent dividend increase, the shares tumbled 33p to 379p, reducing its worth from pounds 8.5bn to pounds 7.77bn.
The announcement wrong- footed analysts, many of whom had recently talked to the company about prospects ahead of its year-end next month.
Grand Met was forced to make the announcement because of disclosure rules laid down by the Securities and Exchange Commission in the US, with regards to a dollars 600m fixed-rate debt issue. The issue, announced yesterday, will replace existing borrowings.
Sir Allen Sheppard, chairman of the international food and drinks group, said that since the interim results in May, there had been no economic recovery in the UK or the US. European markets have also softened.
Most of the damage inflicted on Grand Met has been on the food side, particularly at Green Giant, the biggest vegetable company in the US. Green Giant's profit margins have been squeezed by weak consumer demand, and pricing pressures partly brought about by bumper harvests.
Green Giant is a major brand in Grand Met's portfolio, which includes Pillsbury, J&B Whisky, Burger King and Haagen-Dazs super-premium ice cream.
The company's warning sparked a wave of downgradings by several brokers. They included County NatWest, which cut its projection for the current year from pounds 1bn to pounds 950m, and Carr Kitcat, which lowered its expectations from pounds 1.01bn to pounds 970m.
Martin Hawkins, an analyst at Carr, said the news 'was a bit of a surprise. We have been talking to the company recently.'
The dollar's weakness will have very little impact this year, however. David Nash, finance director, said: 'We had a 9 per cent benefit in the first half and about a 10 per cent erosion in the second half.'
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