Shares in Premier Foods, the Hovis bread and Branston Pickle foods group, plunged to an all-time low today after a savage note from an investment bank and a share sale by a leading investor.

Premier tumbled nearly 10 per cent as Credit Suisse predicted that the company would be forced to cut its shareholder dividend this year and downgraded its price target on the stock to 100p from 250p.

The rival bank ABN Amro later disclosed that it had sold 15 million shares in Premier at 100p for a private client.

The double blow came as Associated British Foods, Premier’s fierce rival in the food sector, revealed strong sales growth at its grocery, agricultural and Primark clothing divisions in an update that fuelled profit upgrades in the City.

Credit Suisse said that the AB Foods statement was “somewhat better than our expectations”.

Charlie Mills, a Credit Suisse analyst, said: “AB Foods’ trading update underscores a pretty robust operating performance.”

Despite the reaction, shares in AB Foods were also down in mid-morning trading, off 20p at 856.5p, in a drop analysts blamed on hedge funds taking up speculative short positions in the stock.

Premier Foods has struggled in recent months from both strong cost pressures and a slump in sales of private-label products in Britain’s main supermarkets.

Credit Suisse kept a "neutral" rating on the stock but said that uncertainty over the capital structure of the group made it difficult to value the shares accurately.

It said that the board may be forced into a string of disposals to boost cash flow, but that these would be earnings dilutive.

Premier shares were down 10p at 96p. They were trading as high as 335.25p last year.

AB Foods revealed that sales at Primark were up 4 per cent on a like-for-like basis in the first half of its financial year, in a stark contrast to the gloom and doom elsewhere in the retail sector.

Price increases and strong sales in the group’s Allied Bakeries arm are also expected to drive an increased in the grocery division’s profits.

Cazenove lifted its profit target for the group’s full-year results by 1 per cent.

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