Britain's biggest food manufacturer Premier Foods posted a 29 percent slump in first-half profit, hit by rampant commodity prices and what it said was an unprecedented fall in demand, according to Reuters. "The market in our categories has been unprecedentedly low this year, down about 4 percent in volume. That is very unusual because normally our categories (groceries and bread) go forward at about 1 percent," Chief Financial Officer Jim Smart told reporters on Friday. Many UK retailers, Premier Foods' customers, have been struggling as consumers, hit by subdued wages growth, a lack of credit and government cutbacks, make economies to cope with rising prices. The maker of Branston pickle, Bisto gravy and Hovis bread was also hit by 14 percent inflation in its raw materials, an extra cost of 150 million pounds ($244.8 million) over a full year period. Premier Foods, which also makes Mr Kipling cakes and Hartley's jam, raised prices but a time lag before they came into effect cost the firm 15 million pounds. It lost a further 10 million pounds when a major customer -- said by analysts and media to be Tesco -- refused temporarily to stock the re-priced products. Premier's Brookes Avana division also saw losses widen after Marks & Spencer cut a pie contract. Premier Foods made a trading profit for its ongoing businesses of 67 million pounds in the six months to June 25. That compares with company guidance of 65-70 million pounds and 94 million pounds made in the same period last year. Sales from ongoing businesses fell 0.9 percent to 974 million pounds. The firm has been selling businesses to bring down its debt, which ballooned following the acquisitions of RHM and Campbell Soups' UK and Irish business. It sold its canned food and meat-free businesses this year for a combined 362 million pounds, helping to bring down its net debt to 972 million pounds. The firm's Chief Executive Robert Schofield is retiring on Sept. 1. He will be succeeded by former Kraft executive Mike Clarke. NO RIGHTS ISSUE REQUIRED Shares in Premier Foods, which have halved in value over the last three months, were down about 2 percent at 15.5 pence at 1012 GMT, valuing the business at about 392 million pounds, well below the 2.8 billion pounds it was once valued at. "A key worry that is likely to overhang the shares for a while is whether the new CEO ... will decide that the balance sheet is still too stretched and will embark on another painfully dilutive rights issue," said Panmure Gordon analyst Graham Jones. Smart categorically denied a rights issue was required. "I can't conceive of the circumstances under which I need to raise equity," he said. He said the firm was, however, aiming to diversify its sources of funding away from being entirely bank financed before the end of 2013, with the bond market "a likely candidate". With re-pricing behind it and a stronger promotional programme, the firm said it was better placed to win market share, although its outlook was, as in any year, dependent on the Christmas period. Smart noted that volumes in its markets were down 0.2 percent in June and up 0.9 percent in July. "You might say that things are getting a bit better but this is very volatile and it's quite clear consumers are cutting back a bit," he said. "If I don't have a big re-pricing exercise to do and I've got the right promotions in store and I've still got my efficiencies going for manufacturing and procurement, there's every reason to think that my grocery business can do a lot better in the second half." The firm said a logistics and head office restructuring will yield 20 million pounds in annual savings by 2013. ($1 = 0.613 British Pounds)
