U.K. Rate Rises Hit Premier Foods, Shares Fall
Britain's Premier Foods said trading had been hit by interest rate rises and its shares slipped more than 5% to a seven-month low after analysts trimmed their earnings forecasts.
Premier Foods, home to Branston Pickle, Oxo stock cubes and Crosse & Blackwell sauces, has bought its way to becoming Britain's largest food firm by buying Campbells Soup's British and Irish operations and RHM in the past year.
The company said it remained confident of meeting its full-year expectations. "We have derivative instruments in place which ... fix the interest rate on 700 million pounds ($1.41 billion) of our debt and cap the interest rate on a further 700 million pounds at a LIBOR rate of approximately 6.2%," Premier Foods said on Monday.
"As a result our exposure to further interest rate rises is limited on this capped element of our debt," it said, adding the integration of Campbell's had been completed and the integration of RHM was on track.
Higher Interest Rates
Cazenove, which rates Premier Foods stock an "outperform" said in a broker note it was leaving its operating profit forecast unchanged but "we would expect to revise our adjusted EPS (earnings per share forecast) to 18.5 pence from 20.0 pence on the back of higher interest rates".
Merrill Lynch, which rates the stock a "buy," said it was "trimming our 2007 to 2009 EPS estimates by 4.5%, 3.5% and 3.9% to reflect recent rises in the Bank (of England) rate".
Premier Foods shares, which have underperformed the London market's food producers sector index by 5% over the past 12 months, were down 4.9% at 279 pence to value the business at 2.35 billion pounds and be the biggest loser among London's 350 biggest companies.
Premier Foods said strong trading in May and June offset the effects of hot weather in April.
Overall, Premier Foods said first-half like-for-like sales fell slightly "as a result of the exit from a number of low-margin own label contracts and a high level of promotional activity behind our branded beans in the first half of 2006".
On July 2, Premier Foods said 580 jobs were at risk from its proposals to close six of its 11 factories following a review of its domestic manufacturing facilities.