Premier Foods renegotiates bank debt and cuts dividend as wheat prices hit profits

By Karen Attwood
Wednesday, 5 March 2008

Premier Foods, the Hovis bread and Mr Kipling cake maker, has slashed its final dividend and renegotiated its banking facilities as it struggles with soaring wheat prices.

The group, which bought the bread business RHM for £1.2bn last year and has a debt mountain of £1.6bn, plunged into the red with a pre-tax loss of £73.5m for 2007, compared with profits of £59m the year before.

Analysts were expecting Britain’s biggest food maker, which has Branston pickle, Oxo stock cubes and Angel Delight among its stable of brands, to pay a 13p a share total dividend, but instead this has been cut to 6.5p.

Borrowing facilities with banks have been rejigged to increase Premier’s “financial headroom” amid an explosion in food commodity prices and general economic uncertainty. The group is taking an additional £125m loan and swapping a £100m acquisition facility to a working capital facility.

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