Associated British Foods FY10 Profit Rises, Strong Growth for Ingredients

At constant currency, and adjusted for the impact of acquisitions and disposals, group revenue increased by 6% but profit was little affected and was still 25% ahead. Four of the company's five business segments reported record profits and Agriculture almost equalled last year’s record.

Nov 9 2010 --- Associated British Foods Group has reported that revenue increased by 10% to £10.2bn and adjusted operating profit increased by 26% to £909m. With 56% of sales and 46% of operating profit generated outside the UK, the translated results of overseas businesses benefited from the weakness of sterling. At constant currency, and adjusted for the impact of acquisitions and disposals, group revenue increased by 6% but profit was little affected and was still 25% ahead. Four of the company's five business segments reported record profits and Agriculture almost equalled last year’s record.

The drivers of this growth were returns from recent investments made, the restructuring of some of the company’s operations and recovery in others. New stores for Primark, enzyme capacity expansion and an increase in sugar production in Zambia all contributed to the increase in profit for the year. “We completed the restructuring of a number of our US and UK grocery businesses, the early benefits of which can be seen in margin improvement. Profitability also improved significantly with recovery in our UK sugar, China sugar and US vegetable oil businesses,” the company reported.

Sugar has received substantial investment through capital expenditure and acquisitions over a number of years. A business that was heavily dependent on UK beet sugar profit prior to reform of the EU sugar regime has been transformed. It now comprises businesses in the EU which have a more stable cash generative outlook, and businesses in the developing regions of Africa and China which provide the prospect of volume growth. The potential for this group is evident from the level of profitability and the international scale now achieved.

The results from Sugar improved substantially this year with revenue ahead by 32% primarily as a result of a full year’s sales from Azucarera, acquired in April 2009, but also with good growth in the UK and from cane sugar in China. This revenue growth, together with an improvement in UK and Chinese margins, drove a profit increase of 43%. 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 9% more than the previous year. Profit and margin were also significantly ahead. Factory performance was excellent with further improvements in energy consumption and costs savings achieved through optimising logistics. The business also benefited from firmer pricing, a stronger euro and 120,000 tonnes of non-quota exports into the world market enabled by a temporary increase in export licences issued by the European Commission.

Ingredients achieved a revenue increase of 8% over last year and operating profit rose by 18%. The improvement in margin was driven by a strong performance from the bakery ingredients and enzymes businesses. The yeast and bakery ingredients business of AB Mauri achieved a good result. Bakery ingredients had another strong year of growth by concentrating on expansion of its range of icings, toppings and fillings in the UK and major new product launches into the craft bakery sector in Brazil, Argentina, Peru and Colombia drove growth in South America. In the US and Mexico we continued to build on our range of technical ingredients as exemplified by the launch of a technologically advanced system for coating dough with an enhanced leavening ingredient which produces tortillas with improved eating qualities, lower sodium and better functional characteristics.

Stephen Catling, CEO, ABF Ingredients said: “What has been pleasing to see is that this result has largely been achieved through organic growth plans with strong delivery coming from investments in the businesses.  This has been successful through excellent delivery on expansion projects despite facing tough economic conditions in many parts of the world.”