Associated British Foods (ABF) has said that its full year results will include a £100m (€125m) impairment charge for its Australian meat business – although it expects second half earnings to be in line with expectations.
The UK-listed firm said in a trading update that its adjusted second half operating profit, which excludes the charge, would be “substantially ahead of last year”.
The company said that adjusted operating profit for its global grocery business with show a decline for the full year, due to restructuring costs at George Weston Foods in Australia and Allied Bakeries in the UK, margin declines at Allied Bakeries and the difficult retail and competitor environment in Australia.
Specifically referring to the Australian market, ABF said: “Restructuring charges and poor trading in the meat business will lead to a substantially worse operating result.”
Meanwhile, in its Ingredients division, the company said its yeast and bakery ingredients business AB Mauri will report “sharply lower” operating profit, reflecting an extremely competitive European yeast market. Margins have remained tight as it has not been able to pass on higher raw material costs to customers, it said.
However, sugar continues to be a sweet spot for the company, particularly in Europe.
“Profit for AB Sugar for the full year will be considerably higher than last year with the benefit of European and African revenue increases and a strong operational performance,” it said.
ABF added that net debt at the end of the fiscal year ended September 15 would be below £1.2bn, compared to £1.3bn a year earlier, despite its recent acquisition of ethnic flour brand Elephant Atta.
The company’s fashion retail chain Primark is also expected to provide a boost, with like-for-like sales growth expected at 3% for the year, reflecting strong sales in the UK market this summer.