Premier Foods made a net loss of £35.8 million in 2007, compared to a profit of £47.9 million in 2006, as soaring wheat prices hit margins.

Premier borrowed money to buy Campbells in 2006, and RHM in March 2007, giving the company bread brand Hovis and Mr Kipling cakes.

As a result, total sales for the group have almost trebled in 2007, to £2.25 billion from £840.7 million in 2006.

But costs have also increased, particularly in wheat, which has seen volatile trading recently due to failed harvests and increased global demand.

The increase in raw material and packaging costs in 2007 for the company’s grocery business was approximately £75 million, while the cost of wheat purchases increased by £150 million.

Robert Schofield, chief executive of Premier Foods, said: “The downside to 2007 has been the exceptional level of cost inflation we and other food companies have faced.”

The St Alban’s-based company said it has been increasing its prices to absorb the extra costs and has re-negotiated debt covenants with its lenders.

Premier slashed its final dividend to 2.2p, giving a total dividend for the year of 6.5p, compared to 13.5p for last year.

Integration costs for RHM and Campbell’s also hit the company’s bottom line, with £158.7 million in exceptional items mostly related to factory closures and redundancies.

Net interest increased to £149.6 million, compared with £41.5 million in 2006, as a result of the company taking on more debt to pay for the acquisitions.