- First quarter sales rise 6%
- Premier Foods fending off inflation for now
- Mr. Kipling achieves highest ever market share in Australia
Shares in Mr. Kipling cakes-to-Bisto gravy maker Premier Foods (PFD) edged 0.4% higher to 111p after the St Albans-based food producer insisted it is ‘firmly’ on track to meet full year expectations. The news came as it reported a 6% increase first quarter sales and further market share gains.
The FTSE 250 grocery products and cakes maker assured investors it has made good progress in offsetting input cost inflation through price increases and efficiencies and also highlighted tasty sales momentum overseas.
However, share price gains were capped by concerns over how long Premier Foods can fend off the impact of inflationary pressures as well as the absence of another round of earnings upgrades.
For the year to March 2023, Shore Capital is prudently sticking to its £126.8 million pre-tax profit estimate, which implies 4.5% year-on-year growth.
Premier Foods’ group sales grew 6% to £197 million in the 13 weeks ended 2 July 2022, a robust result given a challenging food market dominated by inflation and demanding lockdown-inflated comparatives for its grocery brands in particular.
GROCERY GAINS
During the quarter, grocery sales rose by 6.3% to £141.6 million with Batchelors and Nissin performing ‘particularly well’, with good value meal solutions proving increasingly popular as consumers grapple with a cost-of-living crisis.
The company also generated 5.1% growth in sales of sweet treats to £55.4 million with branded sales led by a palate-pleasing performance from the Cadbury stable.
OVERSEAS MOMENTUM
Premier Foods, whose other brands include Ambrosia, Loyd Grossman and Sharwood’s, added that international sales rose by 12% in the quarter, driven by a strong performance in Australia where Mr. Kipling delivered its ‘highest market share ever’.
In Canada and Europe, Sharwood’s has increased distribution in major national retailers while in Ireland and the UK, Nissin noodles flew off the shelves.
CEO Alex Whitehouse said Premier Foods has made ‘good progress in recovering our input cost inflation through a range of measures, including cost efficiencies and pricing, and we continue to monitor the situation closely.
‘Consumers are increasingly looking to cook tasty affordable meals at home; this fits well with our broad portfolio of brands and was illustrated by the strong performance of Batchelors and Nissin in the quarter. With this positive trading momentum behind us, we remain firmly on track to deliver our expectations for the year.’
THE EXPERTS’ VIEW
Danni Hewson, financial analyst at AJ Bell, noted Premier Foods has been able to manage soaring input costs through a combination of efficiencies and increased prices while still building its market share.
‘This offers some evidence of brand power, although how long Premier Foods can sustain its edge over rising prices remains to be seen,’ cautioned Hewson.
‘There’s only so much fat you can trim off a business before you start damaging its operational performance though, and despite featuring many household favourites, Premier Food’s product portfolio is not immune to the risk of consumers trading down to cheaper supermarket own-brand alternatives.’
Shore Capital believes Premier Foods is a ‘thoroughly undervalued stock’, drawing attention to its strong brand portfolio and highly valuable market positions.
The broker pointed out Premier’s operating performance has been ‘excellent for some years now, under the Colin Day/Alex Whitehouse leadership team. That operational excellence, manifested through the Branded Growth Model, is delivering sequential year-on-year sales growth, market share gains, trading profit advancement and free cash generation.’
DISCLAIMER: Financial services company AJ Bell referenced in this article, owns Shares magazine. The author of this article (James Crux) and the editor (Steven Frazer) own shares in AJ Bell.
