The firm said: “Following a recent business review, and consistent with its approach to improving sustainable profitability in bread, the company will be unable to renew a bread contract it holds with a retail customer with effect from mid 2013.
“This contract loss accounts for approximately £75m annual sales, has very low margins, is costly to service and will not affect 2012 performance.”
Rising wheat costs are adding to the pressure on Premier's bread business.
Ebb and flow
Panmure Gordon analyst Damian McNeela said:“There is a degree of ebb and flow to the non-branded bread business and although the margins associated with the lost contract are low it is a larger than average contract and hence the company have disclosed it.”
Martin Deboo, analyst with Investec Securities said: “While the contract is low margin, it will represent lost contribution. We expect this to be a further catalyst for more radical actions to realise value from bread.”
Meanwhile, Premier Foods revealed a 2% rise in underlying sales in its management statement covering the three months to September 30.
