FTSE higher despite UK inflation and tension in Eastern Europe, and Premier Foods enjoys exceedingly good pricing power

“The FTSE 100 was higher on Wednesday despite mounting tension in Eastern Europe where a stray missile of unknown origin struck NATO member Poland,” says AJ Bell Investment Director Russ Mould.

“Given Russia had launched missile attacks in neighbouring Ukraine yesterday it was inevitable that fingers would be pointed in their direction though there is still considerable uncertainty over what exactly happened and how.

“Defence firm BAE Systems was among the top FTSE 100 risers as investors chewed over a possible escalation of the conflict. Index heavyweights BP and Shell were also higher as oil prices rose on the latest developments.

“The divergence in the inflationary pressures facing the US and UK were brought into focus by the latest figures on this side of the Atlantic which were materially higher than anticipated.

“This reflects the much greater energy independence of the US relative to the UK, with rising gas and electricity bills a significant contributing factor in the surge in UK prices.”

Premier Foods

“There’s only one verdict which fits the stock market scorecard for Mr Kipling maker Premier Foods over the last few years: exceedingly good.

“Premier Foods’ half year results are evidence of the progress the company has made, and continues to make, despite cost-of-living pressures. At one time this was virtually a zombie business thanks to an onerous debt pile.

“Now, with its balance sheet whipped into shape and a focused portfolio of winning brands, Premier Foods has been brought back to life and is demonstrating genuine pricing power to protect its margins from the impact of rising input costs.

“People are clearly prepared to pay a bit more when it comes to cupboard fillers like Oxo, Bisto, Mr Kipling, Homepride and Paxo rather than trading down to cheaper unbranded alternatives. Premier Foods continues to follow the blueprint established by larger US food producers of innovating within its brands to create spin-off products.

“Premier Foods has benefited from consumers feeling too pinched to eat out or order takeaways as often they used to. It seems as if there is a tailwind for more meals prepared at home – hence the launch of a ‘Best Restaurant in Town’ affordable meal campaign.

“Premier Foods has successfully taken costs out of the business as it looks to contend with inflationary pressures, though it has to be careful not to take this too far and risk damaging its much-improved operational performance.”

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