Premier Foods said it expected to hit its 2008 profit targets despite a decline in branded sales in the second half of 2007.
Christmas trading was satisfactory across the group and was led by the cakes and customer partnerships businesses, said the company.
The main cost pressure over the year came from increases in the price of wheat. Premier said bread price rises and cost savings had helped to offset the effect of more expensive raw materials. Profitability had also been enhanced by the progress of the rationalisation plan with two factory closures in 2007 and seven more planned in 2008-2009. Second half sales were up 3%, while sales over the full year should be 1.6% higher.
The cakes and bread bakeries divisions were the best performers with sales gains of 7% and 6% respectively. By contrast branded business fell by 8%.
Premier Foods CEO, Robert Schofield, said: "We foresaw raw material and packaging inflation led by wheat but also affecting dairy, fruits and vegetables. Whilst these additional costs have had an impact in the second half of 2007 we have recovered a large proportion of these cost increases through pricing and cost savings."