ABF's ingredients focus, expansions and costs

By Jess Halliday

- Last updated on GMT

Related tags: Protein

ABF's ingredients division is reaping the rewards of a focus on
core ingredients and expansion to meet demand, despite the impact
of costs in dairy proteins.

The food and retail group issued its statement up to March 1 before entering a closed period (during which it will not comment on financial activity) that will run until publication of the actual results on April 22. Dairy costs impact protein ​ While the company is expecting the upswing in sales to continue, it said that its protein business has been particularly affected by costs. Protient, which has four manufacturing plants in the United States, is involved in the isolation of protein from dairy. Despite having broadened out the markets it serves in recent times from sports nutrition to health, dairy products, and other food applications (as well as animal feed), the dairy origin of its proteins has made it vulnerable to the extreme hikes in milk prices experienced over the last year. The higher prices have been explained in part by higher costs of dairy prices as animal feed increases on the back of the biofuels boom, as well as increased demand for dairy from markets like India, where newly affluent consumers are starting to hanker after Western-style diets. Focus on core ingredients ​ ABF is currently prioritising its core ingredients business following last September's decision to de-merge its sugar and ingredients operations. One move it has recently effected to this end is the sale of its emulsifier business, Abitec, to Danisco. The sale, for an undisclosed amount, was announced at the end of January and is subject to approval by the competition authorities. Abitec generates revenue of around DKK 200m (€26.8m). Enzymes ​ ABF said growth in enzymes has been achieved "by a combination of increased sales resource with a wider geographical reach and the introduction of new products".​ While it did not give details of the new markets it is cracking, new launches include Vernon HPP and Vernon S 50, both of which were announced In January. Vernon HPP can be used in the manufacture of long-life confectionery products, and also has uses for biscuits and crackers, as it can reduce dough resting times. The upshot of this is improved dough extensibility and handling, leading to better appearance (colour and shape) of finished products. Vernon S 50, meanwhile, takes dough property improvement a step further. Dr Gerald Jungschaffer, business unit manager baking enzymes, said it "optimizes the properties of baked biscuits and crackers as friability, browning, well rounded edges, smooth surface, reduced cracking, uniform weight and size for packaging."​ In February the company also announced the acquisition of Quantum Phytase feed enzyme business and technology. Yeast ​The company has signalled a boom in its South American yeast activities with lower operating costs in Brazil, as well as lower costs of its source, molasses. Moreover it has also expanded its plant in Argentina, transforming it into what is claimed to be "one of the lowest cost plants in the world".​ Ohly Yeast Extracts has also expanded in China with the building of a new yeast extract plant in Acheng, Harbin, China. Annual output is expected to be 15,000 tonnes of yeast extracts for the food and fermentation markets, and following investment of around US$50m it is expected to be up and running in 2009. In addition, sister company AB Mauri will further expand in baker's yeast at the existing Acheng, Harbin site. ABF Ingredients CEO, Stephen Catling said "this is a logical expansion to our Ohly Yeast Specialties business which further compliments our ability to service the market globally with our existing plants in Europe and the USA".​ CEO Ohly and Yeast Specialty Proteins, Robert Rouwenhorst said when the China expansion was announced that "the yeast extract market continues to grow, especially in the Asian region, we will be well placed to meet this demand".​ The new investment in China follows some$15m investment in the plants in Boyceville, Wisconsin, USA and Hamburg, Germany, in 2006 and 2007. Comparable figures ​For the 24 weeks ended March 3 2007, ABF Ingredients reported a 7 per cent increase in revenue on the previous year to £345m and profit up 3 per cent to £33m. For the group as a whole adjusted operating profit was up 7 per cent to £272m, and group revenue up 12 per cent to £3,220m.

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