As the market remains buoyant ahead of the Greek austerity vote - despite TV pictures of rioting in Athens - an exception is Premier Foods.
The company behind the Hovis, Bisto and Branston brands, is down 1.09p at 24.49p - the biggest faller in the FTSE 250 - after Credit Suisse cut its recommendation from outperform to neutral and its price target from 38p to 30p. Analyst Charlie Mills said:
Though Premier Foods shares are still cheap, we believe, the investment case is dependent on stability in trading. Unfortunately we don't yet see this. Furthermore we see any satisfactory refinancing of the debt in the current climate as unlikely.
The refinancing of the debt was a part of our bull case in the second half, but with the high-yield risk-appetite reduced we don't see this happening any time soon.
Premier's markets are weak; promotional levels in the trade remain intense; the lag on raw material inflation recovery will cost close to £25m; the loss of a major pie contract will likely delay the recovery in chilled.
Such news suggests that there will be rather higher restructuring charges against this division this year (and thus the reported profit may not show any progress), and that the main impact from the lost sales will come next year....though there may be some offsetting business gains. That remains to be seen.
