ABF Predicts Decline in Profits Due to Weak Sugar Operations

15 Jan 2015 --- Associated British Foods has announced its operating profit is likely to decline this year as a result of its struggling sugar business.

Sugar sales decline in the UK and Spain in the 16 weeks ending January 3, as prices fell and world supplies outpaced demand, according to a statement by ABF.

Sugar prices are expected to stabilize this year, the company said, but it expects a “further large reduction” in sugar profits this year. In addition, sugar content in the beet is lower than last year, but in a statement the company confirmed it is benefiting from good extraction rates.

ABF said it has also made substantial progress in developing a beet sugar business in north China, "particularly in the advancement of both agricultural and factory operations". ABF said it expects most of its sugar factories in China toi be "cash generative, even at the current low sugar prices", but it confirmed it would be closing two factories in the region that have proven to be challenging.

In grocery, Twinings Ovalting contines to make good progress, and is "on track to deliver further good profit growth" this year. 

And its recovery in Ingredients is continuing, while its Agriculture businesses have "maintained the strong momentum of last year", it said. 

Meanwhile, revenue at Primark rose ahead of estimates at 12% in the 16 weeks ended January 3. The chain has been expanded across Europe in recent years and the first US store is set to open in Boston this year.

"This year we expect Primark's expansion to continue and Gcoery, Ingredients and Agriculture to make further progress in operating profit on the back of their very positive performance last year," the company said. "With the fall in EU sugar prices and weakness in the world sugar price, we expect a further large reduction in profit from AB Sugar, but this will put much of the effect of the structural changes in EU prices, seen over the last three years, behind us."