Some 900 jobs are to go at Premier Foods plc after the Hovis manufacturer announced a range of measures to reshape its bread business.
Premier plans to close two bakeries, cut over 100 distribution routes and revamp its logistics operations in a bid to cut costs from its bread arm.
The company wants to close its bakeries in Greenford and Birmingham. Distribution sites in the two locations are also up for closure amid plans to remove 130 routes from its network. Two other distribution sites in Mendelsham and Plymouth are also set to close. Premier is changing its network after the end of its contract to supply own-label bread to The Co-operative Group. Premier said it would "restructure" its outsourced logistics operations to "optimise" the new-look network.
Premier, operating in a UK bread sector dogged by promotions and excess capacity, is trying to shake up its bread business to cut costs and improve returns.
The company has even been reported to have hired Goldman Sachs to see what takeover interest there could be in its bread business, although it has refused to comment publicly on these claims.
Click here to read analysts' views on the closure of Premier's two sites.
Show the press release
PREMIER FOODS ANNOUNCES FURTHER STEP TO BUILD VALUE IN BREAD
Premier Foods today announces a further step to build value in its Bread business and drive sustainable profitable growth through simplifying its manufacturing and distribution operations to improve efficiency, quality and service levels, so enhancing the performance of the Hovis brand.
Proposals have been developed to close two bakery sites in Greenford and Birmingham during the course of 2013, in addition to the previously announced closure of the Eastleigh bakery, and to consolidate production from these locations into the Company’s remaining bread manufacturing sites. In addition, it is proposed to simplify the bread distribution network by removing approximately 130 distribution routes, taking into account the reduction in volumes from the previously announced loss of a low margin bread contract by mid 20131. As a consequence, the Company is proposing to close distribution operations in Greenford, Birmingham, Mendlesham and Plymouth. It is also proposed to restructure the Company’s outsourced logistics operations to optimise the new network. Together, these proposals are expected to result in approximately 900 fewer jobs across the Company’s Bread Division.
Commenting on the proposals, Michael Clarke, Chief Executive Officer of Premier Foods said:
“Having generated solid growth momentum in our Grocery Division, it is critical that we act to assure the long-term future of the Bread Division. By simplifying our cost base, we can increase focus on improving efficiency, quality and service levels to help grow our core Hovis business. We recognise the impact these actions will have for our employees at the sites affected. Decisions will not be taken lightly but they are necessary if we are to build a strong and successful future for the Bread Division and those who remain with our business”.
Appropriate consultations with employees affected by the proposals and their representatives will commence in the coming days.
Charges associated with these proposals are expected to be approximately £28 million and will be reflected in the Company’s 2012 and 2013 financial statements, with the majority of the cash outflows to implement the proposed changes taking place in 2013. The Company expects to recover the majority of the cash impact of the proposed changes in future periods through realising site disposals, reduced working capital requirements and lower capital expenditure. On a pro forma basis, the savings from the proposed restructuring are expected to offset the margin forgone from the lost bread contract. These proposals are not expected to have an impact on 2012 Trading profit.
Original source: Premier Foods
