Shares in Premier Foods plunged 22 per cent to 19.02p yesterday after the company that owns Hovis and Mr Kipling warned on profits.
The group forecast full-year profits would be as low as £65m, down from £94m the previous year. It blamed the soaring prices of commodities such as wheat – which will translate into a £150m hit in the full year – and the decision by one of its major customers, believed to be Tesco, to pull some of its brands, at the cost of £10m. The grocery lines were pulled, Premier said, after it lifted prices to offset some of the commodity costs.
An "unprecedented decline" in its markets caused by the "depressed consumer environment exacerbated by unseasonably warm weather" also hit the group – especially sales of Hovis – with both its grocery and bread falling 5 per cent. The Brookes Avana division saw profits decline £10m following restructuring in Leicester. The company's forecast also weighed on the shares. It said that the state of the economy and pressure on consumer spending meant that, despite a slight improvement, the market will be down in the second half.