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Premier Foods has announced plans to close a manufacturing plant in Knighton, Staffordshire, in a move that could cost as many as 300 jobs.
The Oxo cubes and Bisto gravy maker said that the plant, which mainly makes unbranded powdered drinks, was “marginally” unprofitable at the trading profit level. It is launching a consultation with workers to run until the middle of 2023.
The site, which is likely to continue operating into next year before finally shutting after a phased closure, is one of 15 Premier plants across the UK employing about 4,000 people in total.
Premier said that the Knighton factory, which makes Marvel skimmed milk powder and Bird’s Custard as well as private label products, did not fit with its “branded growth model strategy”.
It added: “It is recognised that this will be an unsettling time for those circa 300 colleagues who are potentially affected by these proposals and they will be fully supported and consulted with throughout the process.”
The move, under which Premier will gradually exit from £27 million of unbranded revenue contracts, is set to cost the company around £10 million in one-off closure costs, but it said the closure of the site would boost trading profits in the long run.
The food manufacturer, which has its headquarters in St Albans, Hertfordshire, was founded in 1975 as Hillsdown Holdings. It has a chequered history after a rejected bid approach, a huge debt burden and a large pension deficit crippled investment and held back sales growth. However, over the past couple of years it has transformed its position.
News of the closure accompanied a trading update showing sales up 12 per cent for the 13 weeks to the end of December – its third quarter – with branded sales up 8.8 per cent, putting the group “well on track” to deliver on full-year expectations.
There was a particularly strong grocery performance, with sales up 17.4 per cent, as the division won market share, but its sweet treats unit went the other way, with third-quarter sales falling by 0.9 per cent on the back of a 10.8 per cent slump in branded sales. International sales rose by 10 per cent.
Analysts reacted positively to the decision to close the Knighton plant, which Martin Deboo, at Jefferies, said “has had a chequered history and a decisive resolution is to be welcomed”.
Alex Whitehouse, 53, chief executive of Premier Foods, said that “across the country, people got cooking again at Christmas”, with Ambrosia custard and Bisto’s new pigs-in-blankets gravy granules proving particularly popular. Mr Kipling turned in a strong sales, winning a share of the mince pies market with its new range.
The group said that sales of Cadbury cakes were hit by unscheduled maintenance at one plant line. This has since been completed and full production has now resumed.
He said that input cost inflation remained “at elevated levels” and that the group continued to take action to offset this through a range of measures, notably cost savings and price increases.
“With strong trading momentum as we enter our final quarter of the year, and with more brand investment and new product launches to come, we are well on track to deliver on expectations for the full year,” he said.
Shares of Premier dipped by ¾p, or 0.7 per cent, to 113¼p in late morning trading.