Premier Foods first quarter sales dip, despite good growth from Cadbury cakes

23-Jul-2017 - Last updated on 24-Jul-2017 at 12:03 GMT

Premier Foods' reported it experienced a drop in Q1 2017 sales after warmer weather negatively affected winter favorites like Bisto gravy, but sales of Mr Kipling sweet treats were up. Pic: Premier Foods

Mr Kipling maker Premier Foods’ reported a 3.1% sales dip in 2017 Q1 as warmer weather negatively affected winter favorites like Bisto and Oxo, but this was offset by bigger demand for sweet treats.

The company reported total group sales were down 3.1% for the 13 weeks ended 1 July 2017, concentrated in its branded Grocery division.

Revenue from products like Oxo, Bisto and Sharwood’s contribute more than two-thirds of Premier’s profits. The division saw a 7.9% sales drop in the first quarter.

“The weather in June – that’s not good for gravies and stocks,” said CEO Gavin Darby.

He also attributed the drop on retailers cutting back on multi-buy promotions, particularly in the Desserts category, on products like Angel Delight and Ambrosia.

However, the company’s Sweet Treats division experienced a hike of 3.8%, thanks to the increase in sales of Cadbury cakes and the introduction of Mr Kipling indulgent tarts and a new gluten-free range.

The company’s International business also grew 20%, boosted by sales of Cadbury cakes in Australia.

Premier signed an agreement in May to make Cadbury cakes for the next five years.

As expected

According to Darby, the lower first quarter sales were expected.

In January, Premier had issued a warning that profits would be 10% lower than hoped.

The company blamed the reason on rising commodity costs and supermarkets ditching their multi-buy promotions.

Darby also said Premier had expanded its market share.

Better second half

Despite the disappointing Q1 figures, the company is expecting a strong second half of the year, “assuming normal UK temperature trends,” said Darby.

It also plans to increase the number of multi-buy promotions in supermarkets to boost sales volumes.

“We expect to report positive sales growth in the second quarter, broadly flat sales in the first half and our expectations to deliver progress in the full year are unchanged,” said Darby.

Premier is still shackled with a net debt of almost four times EBITDA (approximately £7m/$9.12m) and has a similarly-sized pension deficit.

However, it is aiming to cut its net-debt-to-EBITDA ratio to three in the next three to four years.