Premier Foods hikes bread prices as wheat costs soar

Premier Foods, Britain's biggest food producer, announced a hike in the price of its Hovis bread yesterday and said it may need to make further increases if wheat prices remain around their current highs.

Shares in the firm, which have fallen as much as a third in value this year, rallied over five per cent in early trade amid hopes it will be able to limit the damage from a near doubling in the price of wheat over the past 12 months.

But some analysts said they would still trim their full-year profit forecasts following a halving in profits from Premier Foods' bread business in the first half, and warned the price hike could allow rival bread makers Associated British Foods and privately owned Warburton to gain market share.

Premier Foods, which also makes Branston Pickle, Oxo Stock cubes, Mr Kipling cakes and Quorn meat substitute, declined to say by how much it was raising bread prices.

But chief executive officerRobert Schofield said a major retailer had increased the price of a white loaf by eight pence, taking it to over one pound.

He was also sure that Warburton and AB Foods, which makes Kingsmill bread, would follow suit.

"We'll be very surprised if general bread prices don't go up because the pressures upon us all are the same," he said. Panmure Gordon analyst Graham Jones said the price hike was sooner than expected, but that he was still likely to trim his full-year underlying operating profit forecast of £312 million.

Premier Foods, which also makes Bisto gravy, Sharwoods sauces and Angel Delight desserts, said operating profit before goodwill and one-off items more than doubled to £96.8 million in the six months to June 30, boosted by acquisitions.

Forecasts ranged from £95 million to £98 million in a Reuters poll of eight analysts.

But underlying operating profit at the group's bread business halved to £19 million.

"Whilst mindful of the turbulence that we have seen in the bread market over the last few months, we anticipate that we will be able to meet our sales and trading profit growth targets for the year," it said in a statement.

Premier Foods is aiming to increase underlying sales by 1.5 to two per cent this year, helped by new products such as Oxo liquid stock and its Best of Both bread, which is a white loaf that has the nutritional level benefits of wheatgerm.

The firm did not disclose its profit target, but Finance Director Paul Thomas told Reuters he was comfortable with analysts' current range of forecasts.