ABF’s Sugar Unit to Return to Profit
12 Sep 2016 --- Associated British Foods has signaled a turnaround in fortunes of its sugar business after years of falling prices, saying operating profits in 2016 will be higher than in 2015.
ABF, which owns sugar production, an agriculture business, a grocery unit and retailer Primark, said operating profits across the group were ahead of expectations in the second half of the year, bolstered by a weakening of the pound since the EU referendum.
In its trading update for the year to September 17, ABF signalled a change in fortunes of its sugar business, which it acquired from British Sugar in 1991.
The division has struggled as it has been hit by falling sugar prices, which fell from $786m a ton in 2012 to $444 a ton in 2015.
ABF pointed to a reduction in EU stock levels of sugar and an increase in world sugar prices as helping the performance of its sugar division.
ABF added: "All of our sugar businesses have delivered substantial cost reductions again this year through a combination of continuous improvement, business transformation, capital expenditure and procurement activities."
The group also disclosed that it had sold its loss making cane sugar business in south China to local business Nanning Sugar, as it looks to concentrate on Africa and Europe.
Across its ingredients business, ABF said revenues and operating profits in 2016 are expected to be ahead of 2015.
Amid a challenging marketing, AB Mauri, its bakery ingredients and yeast business, continued to recover.
The bulk of profits came from the Americas, helped by new product launches targeted at US consumers.
AB Mauri's performance in China was helped by cuts to production facilities while investment in Centres of Excellence in the UK and US are also hoped to drive performance.
Across its agriculture business, ABF said it expected profits to be "just below" 2015 amid challenging condition, which meant lower UK feed profits.
In the UK, its pig starter feed business had a strong year but the smaller UK sugar beet crop resulted in less beet feed availability which adversely affected revenue and profit.
AB Vista, its animal nutrition and technology business, achieved further volume and market share growth driven by strong sales of its two leading feed enzyme products, Quantum Blue and Econase XT.
In feed ingredients, it said the recent acquisition of Danish animal feed business Agrokorn would provide a platform for further growth in specialist proteins for pigs, calves, poultry, fish and pets.
Across grocery, flagship tea brand Twinings had a strong end to the year, led by the brands performance in Australia and the US.
Against a backdrop of retailers continuing to discount bread heavily, its bread division Allied Bakeries "held up well “driven by a substantial increase in volumes.
