The maker of Mr Kipling cakes and Bisto gravy has said it will have to raise its prices as the costs of wheat, dairy and energy soar.
Alex Whitehouse, Premier Foods’ chief executive, said the company was facing inflationary pressures of more than 10 per cent within its business and that while it would try to mitigate this by cutting costs elsewhere, some of the extra expense would have to be passed on to consumers.
The admission came days after Andrew Bailey, governor of the Bank of England, warned about “apocalyptic” food price increases.
“Food inflation is significant and for some families that’s going to be pretty tough”, Whitehouse, 52, said. He added that “consumers are increasingly looking for good value meal solutions” and he expected to benefit as people saved money by eating at home rather than visiting restaurants.
The comments came as Premier Foods reported a 16.4 per cent rise in pre-tax profits to £102.6 million in the year to April 2, beating City forecasts. It said it had gained market share during the period, with sales rising by 6.3 per cent to £900.5 million.
Last year, the group restarted dividend payments for the first time in 13 years and the company said that after another strong year it would increase shareholder rewards by a fifth to 1.2p a share.
Premier Foods’ shares jumped by more than 10 per cent, or 10¾p, to 117½p.
Premier Foods has had a chequered recent history after a rejected takeover approach, a bloated debt pile and a large pension deficit crippled investment in the business and stunted sales growth.
However, the company’s recently improved trading performance has led to an overhaul of its pension schemes, which has led to a £125 million reduction in payments, and it has significantly reduced debt with leverage now at 1.7 times earnings. Whitehouse said “over the last two years we have completely transformed our financial position”.
Mr Kipling warns of price rises