ABF: steady growth but food not immune

Related tags Associated british foods Profit

Despite tougher trading conditions UK food and food ingredients
business Associated British Foods (AB Foods) reported on Tuesday
that operating profit had risen 14 per cent for the first 24 weeks
ended 1 March 2003 to £204 million. Recent acquisitions and organic
growth in existing businesses boosted the results.

During the period AB Foods absorbed US company Mazola in July 2002 and Ovaltine at the end of November 2002. The move both extended the range of brands for the company and contributed substantially to profit growth.

"This is a strong set of results with double digit operating profit growth. It demonstrates good performances from our continuing businesses as well as the benefits of the investments made in acquiring Mazola and Ovaltine,"​ said Peter Jackson, chief executive of Associated British Foods.

Group sales were up 8 per cent to £2,259 million, net investment income down from £13 million to £12 million and profit before tax up 13 per cent to £216 million.

In primary food and agriculture, the company reports that a good sugar campaign and the euro's strength against sterling helpedBritish Sugar's profits but these benefits were partly offset by weak prices in Poland and China.

Turning to ingredients, AB Foods reports a distinctly mixed performance. Both enzymes and lipid technologies showed strong growth and the improvement shown last year at SPI, the company's US based polyols business, has continued.

Sales were up 15 per cent to £141 million and profits up 8 per cent to £13 million. SPI maintained the strong recovery reported at the year-end.

A sluggish performance from the Abitec ingredients business continues. Six months ago AB Foods reported that its subsidiary was facing problems in re-organising and integrating its existing and newly acquired bakery ingredients businesses inthe UK and the US. AB Foods chairman Martin Adamson warned in a statement yesterday that these problems are taking longer than expected to resolve and results in the period have been poor. In the US, a new management team is now in place while in the UK the operational problems are being tackled with improvement expected in the second half, reports the company.

Crystalline maltitol and speciality liquid sweeteners continued to benefit from the rapid growth of the sugar-free confectionery market, added the chairman.

Wholly owned Australian subsidiary George Weston Foods, acquired in September 2002, is now totally integrated in the appropriate business segments. Although the chairman made now reference to the shake-up, IndustrySearch.com reports today that high costs have forced George Weston Foods, the maker of Wagon Wheels biscuits, to close its Camperdown factory in Sydney with the loss of around 200 jobs. According to the news item, AB Foods​ said that in its present form, the company's biscuit and cake business was not viable.

Looking ahead to 2003 the chairman warned :"I referred earlier to the difficult economic and political conditions of the past half year. At the time ofwriting there is no sign of imminent improvement, if anything the risks of economic recession andpolitical volatility are greater than they have been.

Although the sectors in which we operate are lessvulnerable than many to the consequences of such conditions, they are not immune."

Despite this, Adamson predicted a further significant operating profit growth in the second half of the year, although unlikely to be as strong as in the first half.

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