900 jobs to go as Hovis owner Premier Foods closes two bakeries

 

Troubled Hovis maker Premier Foods is to close two bakeries and four distribution centres with the loss of 900 jobs as its bread division continues to be hit by soaring wheat prices.

A bakery and distribution site in Greenford, West London, will close with the loss of 196 jobs.

The closures come as a direct result of Premier’s decision to pull out of a £75 million-a-year contract supplying the Co-op supermarket chain at what it revealed last month were wafer-thin margins. The business has been hit by intense competition and soaring wheat prices following global droughts.

There has also been speculation that Premier is looking for a buyer for the whole of its bread business. Today it said that the closures would cost it  £28 million this year and next but that it expected to recoup much of that cost by selling off the sites.

Analysts also pointed out that by taking the pain now Premier would make its bread division more attractive to any potential purchaser.

Premier, which is weighed down with more than £1 billion of debt after a huge spending spree in the early years of this century, is now pulling back to concentrate on core brands like Bisto, Sharwood’s and Mr Kipling.

Michael Clarke, chief executive, said: “Having generated solid growth momentum in our grocery division, it is critical that we act to assure the long-term future of the bread division.

“By simplifying our cost base, we can increase focus on improving efficiency, quality and service levels to help grow our core Hovis business. We recognise the impact these actions will have for our employees at the sites affected.

“Decisions will not be taken lightly but they are necessary if we are to build a strong and successful future,” the Premier boss added.

The second bakery to close is in Birmingham with the loss of more than 500 jobs. Premier had already announced the closure of another bakery in Eastleigh, Hampshire. The group also said it will remove 130 distribution routes as a result of the ending of the Co-op contract.

So far this year Premier has sold a trolleyful of brands including Branston pickle, Sarson’s vinegar, Hartley jellies and Roberston’s jam

Panmure Gordon analysts said: “Today’s move looks logical and much better than the alternative of cutting prices in an attempt to regain lost volume which would have risked the further erosion of margins.”

Premier’s shares rose by 2.63p  to 94.88p.

The news comes a day after meat processor Vion revealed that it will pull out of the UK putting up to 1300 jobs at risk.

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