ABF Reports Continuing Tough Environment for Ingredients, Boosted by Sugar Business

George Weston, Chief Executive of Associated British Foods, said: “The group delivered good growth in revenue and profit. AB Sugar and Primark both performed strongly, demonstrating continuing momentum. We expect substantial growth in both adjusted operating profit and adjusted earnings per share for the group for the full year.”

25 April 2012 --- Associated British Foods plc has announced its interim results for the 24 weeks ended 3 March 2012. ABF delivers adjusted earnings growth of 5%, with group revenue up 11% to £5,766m and adjusted operating profit up 6% at £412m and adjusted profit before tax up 3% to £363m. Operating profit was up 6% to £378m, profit before tax up 3% at £329m and basic earnings per share was up 4% to 31.7p.

George Weston, Chief Executive of Associated British Foods, said: “The group delivered good growth in revenue and profit. AB Sugar and Primark both performed strongly, demonstrating continuing momentum. We expect substantial growth in both adjusted operating profit and adjusted earnings per share for the group for the full year.”

Revenue in the first half grew by 11% and adjusted operating profit increased by 6%. Net financing costs were higher than last year’s first half, resulting from the higher level of net borrowings at the beginning of the period. Although lower than the rate used in the interim results last year, the underlying tax rate of 25.9% was, as expected, higher than last year’s full rate of 24.6%. Adjusted earnings were 5% ahead at 34.4p per share.

ABF’s sugar businesses delivered profit substantially ahead of last year with much stronger regional sugar prices and an excellent campaign in the UK compared with the challenges of last year’s winter. Over recent years AB Sugar has made a significant investment in efficiency improvements to establish itself as a leader in beet sugar production in Europe and to make it more cost competitive on a global basis. Further improvements are planned. “We believe the ending of sugar quotas in 2015, as recently proposed by the European Commission, is premature and is likely to jeopardise further investment in the European industry. AB Sugar is engaged with policymakers in the EU to explore alternative options for sugar reform,” Charles Sinclair Chairman stated.

In Grocery, Twinings Ovaltine and the UK businesses performed well. However, a combination of higher costs for the Castlemaine meat factory and a difficult trading environment in Australia led to a disappointing first half for its meat business in George Weston Foods although a recent improvement in its bakery business is encouraging. With an extensive overhead reduction programme now under way, the business has taken a charge for restructuring in the period. Allied Bakeries continued its focus on lowering its cost base with further capital expenditure in its bakeries and it also took a one-time overhead reduction charge.

In Ingredients, a continuation of input cost pressures and increased competition, combined with a rationalisation charge, reduced operating profit in the yeast business. Primark again delivered a robust result. Revenue grew by 15% in the half year driven by a strong programme of new store openings, with 1 million sq ft of selling space added in the last 12 months, and a like-for-like sales increase of 2%.

“AB Sugar’s investment over recent years, its focus on maximising capacity utilisation and operational efficiency and the strength of regional sugar prices, are expected to drive the full year profit for Sugar well ahead of last year. This, together with strong profit growth from Primark in the second half, should more than offset the lower profit in Grocery and Ingredients. We continue to expect this to result in substantial growth in both adjusted operating profit and adjusted earnings per share for the group for the full year,” Sinclair added.