ABF Reports Strong Ingredients Performance

The yeast and bakery ingredients business traded well and ABF Ingredients benefited from better lactose prices in speciality proteins and from lower overhead costs.

21 Apr 2010 --- Associated British Foods plc (ABF) has reported that group revenues increased by 10% to £4,796m and adjusted operating profit was 25% ahead of last year at £370m. Although these results include a translation benefit arising from the weakness of sterling, group revenue still increased by 5% and profit by 20% at constant currency. These results reflect strong performances across the group. ‘Our Sugar business has been transformed, our brands and marketing strategies are delivering growth in Grocery, the broad geographic base continues to drive momentum in Ingredients, and Primark goes from strength to strength’, the company reported.

“At the Annual General Meeting in December we expressed a concern that the pace of economic recovery and the outlook for the UK consumer remained uncertain. Whilst we remain of this view, some easing of these pressures in the short term is evident in these results. Encouraged by the success to date and the strong momentum of the business into the second half, we are currently confident of achieving very good progress in earnings for the full year”, ABF Chairman, Charles Sinclair said in a statement.

Ingredients achieved a revenue increase of 7% over last year to £509m and, with an improved margin, operating profit increased by 18% to £47m. The yeast and bakery ingredients business traded well and ABF Ingredients benefited from better lactose prices in speciality proteins and from lower overhead costs. AB Mauri, ABF’s yeast and bakery ingredients business, delivered a strong performance. Trading results, particularly in North America and Latin America, were significantly above the prior year, driven by a good performance in the yeast businesses coupled with the continued expansion of our technical and traditional bakery ingredients business. Commodity costs were generally lower than last year although the benefit was partly offset by localised increases in molasses costs driven by high world sugar prices. The integration of the recently acquired European bakery ingredients business was completed and contributed strongly to the result.

A number of capital projects are in progress. The company continued their programme to upgrade effluent treatment plants in China, India, Vietnam, Argentina and the UK, and the new yeast plant being built in Harbin, north east China, is on track for commissioning before the end of the financial year. This plant will produce yeast for domestic and export markets as well as yeast extracts. Our business in Chile was affected by the severe earthquake at the end of February. No employees was injured but ABF’s offices, distribution centre and bakery ingredients plant in Santiago suffered some structural damage. Work is under way to rebuild the damaged premises and alternative arrangements have been made to ensure continuity of supply to customers, ABF stated.

The performance of ABF Ingredients was much improved. Having been capacity constrained for some time, the enzymes business achieved revenue growth in the period with the benefit of the recently completed expansion to its manufacturing facility in Finland. Strong sales growth in feed enzymes was driven by new product registrations and increased market coverage. Yeast extracts in the US delivered a strong profit increase following a move to replace third-party distribution with a direct sales force. The European business will remain capacity constrained until the end of the financial year when product becomes available from our new yeast extracts facility in Harbin, China. In the speciality protein business lactose pricing increased profit and the sale of the Norfolk, Nebraska site was completed in February.

Meanwhile profit from ABF’s Sugar business was 39% ahead of last year driven by a strong performance in the UK and a recovery in China. The sale of the Polish sugar business was completed on 25 November 2009 and its revenue and profit to the date of disposal are excluded from the results of continuing businesses. A profit of £33m on this transaction is included in the income statement within profits less losses on sale and closure of businesses which is excluded from adjusted operating profit.

In the EU, the UK business had an excellent campaign. Favourable growing conditions and improved beet yields led to production of 1.3 million tonnes of sugar which was better than expected and 9% ahead of last year. Despite freezing conditions over the winter, the crop was not significantly affected with the campaign finishing successfully in March. Factory performance was excellent with record operating efficiencies achieved. The business also benefited from firmer pricing, a strong euro, lower than anticipated net energy costs and increased sales to the world sugar market.