Hovis bread
Premier Foods to cut 900 jobs at bread division. Photo: Premier Foods Premier Foods

Premier Foods is planning to cut 900 jobs at its struggling bread division along with the closure of two bakeries and four distribution operations.

According to the plan, designed to improve the performance of its bread business, the food company will close two bakery sites in Greenford and Birmingham in 2013. It had already announced the closure of its Eastleigh bakery. Premier, the maker of Hovis bread, intends to consolidate the closed operations into its remaining bread manufacturing sites.

Additionally, about 130 routes in its bread distribution network will be removed to simplify the distribution process. The company is poised to lose a £75m-per-year bread contract by mid 2013 and that will result in a reduction in volumes supplied.

The restructuring of the distribution network will result in the company closing its distribution operations in Greenford, Birmingham, Mendlesham and Plymouth.

"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," said Premier Foods CEO Michael Clarke.

The proposals will cost about £28m to the company in associated charges to be recorded in the 2012 and 2013 financial statements.

Premier Foods, which also owns major food brands including Bisto, Mr Kipling and Sharwood's, is looking to recover the cash outflows in the future through site disposals, reduced working capital and lower capital expenditure.

The Hovis division was suffering from intense competition in the bread market along with rising wheat prices. The bread division, which also includes Mother's Pride and Granary brands, generates £711m in sales and the largest vertically integrated baker and flour miller in the country, according the company website.

In an attempt to reduce its debt pile of more than £1bn, the company has put about 50 non-core brands for sale.

The company shares are trading at 95.25 pence, up 3.25 percent at 8:39 GMT.