The departure of Premier Foods chairman David Kappler heralds a new round of cost-cutting as shareholders look for faster debt repayment, City figures have warned.

Kappler, chairman since Premier's flotation in 2004, announced on Monday he would step down later this year once a successor had been appointed. Premier said the decision was voluntary and had not contrary to speculation been the result of any shareholder pressure.

Senior City sources said shareholders would expect the new chairman to cut Premier's heavy debt burden more rapidly. Two weeks ago, Premier released a trading update warning profits would be "at the bottom end" of forecasts, leading Premier's share price to fall a further 14% leaving shares 90% below their 2008 levels.

"Premier needs to tackle its debt before it can generate serious profits," said one financial source. "It's not in a position to do this by selling off brands. Hovis is performing well, but has rivals with deep pockets running tight ships. Who'd want to enter that market?

"The result is that to pay off debt quicker, the company will have to get ruthless on costs and that could mean cutting staff."

Premier Foods manufacturing staff said there were signs belt-tightening had already begun. Some have reported loss of privileges and tightening on discipline in the business, which has traditionally enjoyed good staff relations.

One union official told The Grocer that management had contacted several union reps and staff, including himself, to stress the need for commercial confidentiality. He said he was told not to discuss any company information publicly, a move he believed could signal potential job losses or plant closures.

Analysts suggested Kappler's departure could fuel unhappiness in the City with Premier management, including CEO Robert Schofield. However, others said Schofield continued to enjoy good relations with key shareholders, particularly Warburg Pincus, who took a major stake following last year's debt restructuring.