PREMIER Foods, parent company of Rank Hovis in Selby, has announced a £54 million pre-tax loss for the first half of the year.

The company said in its half yearly report for the six months ended June 26 that the loss of £42 million of sales its non-branded division, which was down by a total of £61 million, was attributable to Hovis.

As well as it branded bread, the Hovis division mills, treats and packs flour for other manufacturers, as well as Premier Foods’ other products, such as specialist cake flour for Mr Kipling’s Cakes, which is made at the business’ Rank Hovis plant in Selby.

The business said overall sales in the Hovis division declined by 11.1 per cent, although sales of its branded bread was up 1.1 per cent, from £181 million in 2009 to £183 million.

Its retailer-branded bakery sales dropped from £100 million to £74 million. Milling sales also decreased from £98 million in 2009 to £80 million.

The company said it had exited non-branded bakery contracts to free up capacity to grow volumes of its Hovis-branded bread.

About 4 per cent of the decline was represented by flour deflation, the business said, which means lower prices were passed onto customers resulting in reduced sales, but having a limited effect on profitability.

Premier Foods’ turnover for the six month period was £1.18 billion, down from £1.25 billion in the same period for 2009. It increased its pre-tax losses from £30 million last year to £54.4 million during this period.

The Hovis business contributed a trading profit of £15 million during this period, up from £10 million in 2009, because of improved manufacturing efficiency.

However, the business warned that it is unlikely to grow second half profit to match 2009 levels, because of increased competition in the market and rising wheat costs.

Chief executive Robert Schofield said: “Our principal brands are growing in both volume and market share and our gross margins have risen as we have improved product mix and delivered procurement gains and manufacturing efficiencies. We are controlling costs tightly and have made good progress in strengthening our cash flow and reducing debt.”