ABF to record strong year growth?

Related tags Burns philp Goldman sachs

Sales for the ingredients arm of UK firm Associated British Foods
are expected to rise in the full year as the owner of British Sugar
sees strong growth, beating back raw material costs and adverse
currency movements.

Investment bank Goldman Sachs estimates today that £5.5 billion (€7.9bn) ABF, who recently paid €1 billion for Australian yeast and bakery ingredients firm Burns Philp, could register a 10 per cent hike in operating profits on strong underlying growth.

ABF has four key business areas: grocery, primary food and agriculture, ingredients and retail. Goldman Sachs points to strong growth at the group's retail textile business Primark, expected to be up by 15 per cent, and solid progress at the grocery segment, to grow by some 13.5 per cent, as key drivers for the operating profit.

"We estimate overall operating profits to be ahead by 11 per cent at £454 million (€652m),"​ said the bank.

Goldman Sachs tips that Burns Philp should make a "maiden contribution in the region of £60-70m", and estimates that the ingredients division could register growth of around 9 per cent with US-based food polyols benefiting from further growth in low-carb and sugar free products.

Through the Burns Philp purchase announced in July this year, the maker of the Twining and Ryvita brands gained the number three yeast position for Europe and with it, strong potential earnings.

"The global yeast market is growing at three to four per cent with particularly strong growth in developing countries - in China the market is moving at a 10 per cent pace,"​ a spokesperson for ABF told a press conference at the time.

ABF said it sees strong growth in the yeast market, currently topping 2.3 million tonnes and worth US$1.5 billion annually, with key drivers for growth being a rise in population, bread consumption and 'westernisation'.

Growth is high in developing countries driven by the changes of diet which result from increased affluence. Use of yeast, an essential non-substitutable ingredient used in bread making, increases with the move towards large scale bread production, explained the spokesperson.

Yeast brands acquired through the Burns Philp acquisition include Mauri, Fleischmann and Calsa.

In addition, the firm gains the number two slot for US herbs and spices. With sales of US$2 billion, the purchase lifts ABF into the number two herbs and spices slot behind market leader McCormick. The firm has also become a market leader in bakers' yeast in North America, Latin America and Asia.

"The combination of accretive acquisitions, continued growth in the core businesses and declining growth elsewhere has positioned ABF towards the upper end of the earnings growth tree,"​ commented Goldman Sachs in September, and flagging up the Burns Philps assets as the 'most important' acquisition.

On the bakery ingredients side, the buyout gives ABF bread improvers, conditioners, mixes and fats and oils. The current ABF business is limited to the US, UK and Australia and has focused on high value bread improvers, conditioners, concentrates and enzymes supplied to plant bakers. The combined business will have sales of over €244 million.

Yeast extracts and US herbs and spices also come into the ABF fold.

Related topics Market Trends

Related news

Show more

Follow us


View more