Unseasonal weather blamed for Premier warning

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The Independent Online

Premier Foods, the company behind brands such as Branston Pickle and Angel Delight, took the shine off one of its most successful years yesterday, by warning that rising costs and the recent spell of warm weather would pare back its profits for the second half.

Publishing a trading statement yesterday morning, the company said the recent mild weather, which continued well into December, had meant Christmas trading had begun much later than usual. Meanwhile, the company said it had also been suffering from the pressures of rising costs.

Shares in the company fell as much as 6.5 per cent in early trading, recovering slightly to close down 16.75p at 300p, their biggest ever one-day fall.

The past year has been one of Premier's most successful, with the company snapping up Campbell's Soups and RHM, which owns brands such as Hovis and Mr Kipling cakes.

Robert Schofield, the group's chief executive, said the company was still on track to complete the integration of Campbell's during the first quarter of next year, and also hoped to complete the RHM deal early in the new year.

He added that while the company still expected to deliver like-for-like sales growth in line with forecasts, overall trading was likely to be at the bottom end of expectations.

"The warmer weather, which extended through to early December, has meant that Christmas trading has commenced later than expected, and the out-turn for the year is dependent on trading in the final two weeks of the year," he said. "As indicated at the time of the interims, we have continued to see cost pressures over the second half of the year, which we do not expect to be fully offset until the early part of 2007. These pressures, coupled with the effect on volumes of the exceptional period of warm weather which has continued into December, means that we anticipate that trading for the year will be at the lower end of our expectations while still delivering like-for-like trading and branded sales growth."

Mr Schofield said that sales in its convenience foods, pickles, sauces and meat-free division were set to be "significantly ahead" of last year due to the Campbell's acquisition and strong sales from its Quorn and Cauldron Foods ranges. Sales from the Campbell's deal are expected to add £100m to group revenues this year.

In the company's spreads, desserts and beverages division, the group said growth was being driven by its Ambrosia snacking range and Hartley's jams. However, it said total sales for this division would be less than 2005 after Cadbury's took back Premier's licence to make and distribute its cocoa-based drink products.

The company also said that its fresh produce division was not expected to deliver any profits growth in the second half, due to the particularly hot summer, which took its toll on the potato harvest across Europe.

In a recent straw poll of consumer goods analysts, Mr Schofield was nominated as a candidate for businessman of the year. However, analysts conceded that yesterday's profits warning had taken the shine off Premier's progress.

Graham Jones, an analyst at Panmure Securities, cut his 2006 earnings per share forecast by 5 per cent on the back of the news, but left his 2007 forecast unchanged. "This trading statement takes the gloss off what has been an excellent year of progress," he said.

RHM's shares also fell on the back of the poor trading statement, closing down almost 4 per cent at 380p. Premier's cash and shares bid for the company values the shares at 352.45p.