Suffolk: Premier Foods pressing ahead with restructuring of bread division as core brands drive sales growth

Hovis sales are expected to benefit from a packaging re-design during the second quarter of the year

Hovis sales are expected to benefit from a packaging re-design during the second quarter of the year, Premier Foods said today - Credit: PA

PREMIER Foods said today that the restructuring of its bread business, which includes the closure of a Hovis distribution depot in Suffolk, remained “on track” as it reported a 3.3% increase in sales for its core brands during the first quarter of 2013.

Plans to axe the depot at Mendlesham, near Stowmarket, with the loss of 45 jobs, were announced by Premier last November as part of a package of closures affecting a total of 900 employees within its bread business at distribution, bakery and milling sites around the country.

The group said today that savings from the restructuring programme were expected to offset the loss of margin from the previously announced loss of a £75million contract which is expected to take effect by the end of this month.

Sales within the bread business were 0.8% ahead compared with the first quarter of last year, with Hovis’s market share broadly unchanged. During the second quarter, however, Hovis is expected to benefit from a packaging re-design.

Within the grocery business, sales from the group’s core brands, which include Ambrosia, Bisto, Oxo, Mr Kipling, Sharwood’s, Batchelor’s and Loyd Grossman were 3.5% up on last year’s first quarter, with Ambrosia and Bisto boosted by television advertising campaigns during the period.

However, a 5% fall in non-branded sales left total revenues just 1% higher at £327m.

Premier has been selling off non-core businesses in recent years in order to reduce its debt burden. This included the sale last year of its Bury St Edmunds-based Branston and Haywards pickles businesses to Japanese company Mizkan in separate deals worth £92.7m and £41m respectively.

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Premier’s net debt stood at £950.7m at the end of 2012 and analysts at Shore Capital, who today described the first quarter performance as “sound”, believe this will be reduced further to £850m by the end of this year.