Associated British Foods Expects Rise in H2 Profits

The yeast and bakery ingredients business of AB Mauri will deliver a good result driven by a strong performance from bakery ingredients. Highlights include development of technical ingredients in the Americas and new product launches in Brazil.

Sep 13 2010 --- Associated British Foods plc has issued a trading update prior to entering the close period for its full year results, 53 weeks to 18 September 2010, which are scheduled to be announced on 9 November 2010.

Trading for the group since the half year has been strong resulting in a substantial increase in adjusted operating profit for the second half compared to last year. The net interest expense in the second half will show improvement on last year’s charge but the financing costs of the group’s defined benefit pension schemes in the second half will be higher than last year in line with the increase already seen in the first half. The underlying tax rate will be higher than last year but broadly in line with that used at the half year. As previously indicated, earnings for the full year will show very good progress.

The strong cash flow achieved in the first half has been sustained throughout the year with further progress made in working capital management. Net debt for the group at the year end is now expected to be around £800m. In July the company negotiated a new £1.15bn five year revolving credit facility with a group of twelve banks. The new facility replaces our existing $1.2bn and £320m facilities that were due to mature in October 2011.

The yeast and bakery ingredients business of AB Mauri will deliver a good result driven by a strong performance from bakery ingredients, the company reported. Highlights include development of technical ingredients in the Americas and new product launches in Brazil. In Europe the yeast business in Germany made good progress. Commissioning of the new yeast and yeast extracts plant in Harbin, China is underway. ABF Ingredients has had a much improved year with strong revenue growth from enzymes and speciality lipids in the US and a good recovery in the proteins business.

Sugar profit will be substantially ahead of last year driven by further growth in the EU and a strong improvement in China.In the EU, the UK business will deliver a very good second half result, following an excellent first half campaign. Our Spanish business, Azucarera Ebro, has had a better second half having sold the high-cost inventory that had been brought forward from the prior year, in the first half. However, as previously reported, rainfall was unseasonably heavy across the country earlier in the year, resulting in a reduced beet crop in the south and a lengthened campaign in the north. Both of these factors will constrain the full year performance. At Illovo, profit has been affected by the impact of a weakening of the currencies outside South Africa on the translation of results; the impact of lower world prices and the rand’s strength on South African exports; and the effect of a weakening euro on exports to the European market. The start of the new season has been slower than planned with continued drought in South Africa impacting crop volumes and continued rain in Mozambique and Malawi impacting crop harvesting and sucrose levels. The expanded Zambian factory is running efficiently following completion of commissioning in the first half. Following a difficult year last year, the profitability of the businesses in China has improved significantly. Although production volumes were lower than last year, the business benefited from the recovery in local sugar prices in the first half which was sustained for the rest of the year. Yield remains the largest challenge for the beet business but good progress has been made this year by training farmers in chemical usage and control, the use of appropriately designed machinery and irrigation.