ABF Results Boosted by Encouraging Ingredients Performance

26 Feb 2014 --- Associated British Foods plc has issued a trading update prior to entering the close period for its interim results to 1 March 2014 which are scheduled to be announced on 23 April 2014. Adjusted operating profit for the first half is expected to be in line with last year. A much lower profit from Sugar will be offset by another excellent performance from Primark and encouraging results from Grocery and Ingredients.

Ingredients revenue in the first half is expected to be ahead of last year. Profit from continuing operations will be well ahead of last year’s break-even result, with the absence of restructuring costs and early signs of improvement in yeast and bakery ingredients.

“In January we completed the acquisition of a small bakery ingredients business in Western Europe which complements our existing operations in the region,” the company said in its statement. “The integration of this business, along with the new yeast factory in Mexico, will broaden our product range and strengthen our presence in a number of key markets.”

At ABF Ingredients, the new extrusions factory at Evansville in the US has been successfully commissioned, products have been approved by key customers and the factory is fully operational. Closure of the yeast extracts plant in China was completed with a number of contracts successfully transferred to our Hamburg facility.

Revenue and profit from Sugar in the first half will be substantially lower than last year, the company said. A reduction in EU sugar prices, ahead of regime reform in 2017, has been signalled for some time, although the speed with which the market is adjusting has been faster than anticipated, said ABF. “The world sugar price has also fallen to what we believe to be an unsustainably low level, putting further pressure on industry revenues and margins. This will be reflected in AB Sugar’s results, particularly in China. First half sales volumes for Spain, Illovo and China will be lower than last year,” the company said in its statement.

Also in sugar, the company said its UK campaign is now virtually complete. Good growing conditions through the mild winter resulted in the crop continuing to grow into the new year, with good beet quality and high sugar content. All factories have operated well and sugar production is now estimated at 1.3 million tonnes compared with 1.15 million tonnes last year. Production volumes at the Vivergo bioethanol plant in Hull have increased steadily in recent months. However, both over-supply in the EU and lower seasonal demand have led to a reduction in bioethanol prices.

In Spain, adverse weather in recent weeks has resulted in challenging harvest conditions. Sugar production volumes are expected to be lower than last year. As in the UK, profit will also be adversely affected by the lower prices.

All five factories in south China made a good start to their campaign with sugar content and extraction both ahead of last year compensating for the smaller area under cultivation. Total sugar production is expected to be in line with last year.