Ingredients Help Revenues Rise at ABF

12 Jan 2017 --- Good revenue growth at its ingredients unit helped Associated British Foods report revenues 10 percent ahead of last year in the 16 weeks to January, according to its trading update. ABF Ingredients (ABFI) unit includes a number of ingredients companies including AB Enzymes, which develops enzymes for food and drink applications and PGP International which specializes in cereal and protein crisps and rice based flours & blends.

ABF Ingredients will show a “substantial improvement” in margin when its next full financial results are reported, according to its trading update.

Likewise, revenues at its agriculture unit, AB Agri, which supplies food and feed to manufacturers, were higher than last year and margins are expected to improve when its results are reported.

Overall, revenues at ABF were up across all units of the business, which also includes a sugar business and the discount retailer Primark.

Revenues at ABF Sugar were up 22 percent on the year. A global deficit in sugar helped push up sugar prices while increased production in Africa, and an improvement in a performance program helped lift profits at the unit.

An increase in sugar prices twinned with reduced beet costs is likely to lead to full-year operating results “improve substantiality”.

In the key market of the UK, production is projected to be just under 900,000 tons as a result of a smaller beet crop and yields marginally lower than last year. 

Sales are now largely contracted for this year and with higher prices, lower beet costs and a weaker sterling/euro exchange rate, British Sugar’s full year operating result will improve substantially, ABF said.

Across its grocery division, tea brand Twinings achieved strong sales growth with particularly good performances in the UK, North America and Australia, and Ovaltine performed well in Asia. 

Margins at George Weston Foods in Australia were much improved while Allied Bakeries volumes remained strong but pricing and margins remain challenging.

The strong performance across its businesses meant ABF restated its outlook for the current year, in which it expects to make progress in adjusted operating profit and adjusted earnings.