Poor pound makes good sales value for ABF

15-Jan-2009 - Last updated on 15-Jan-2009 at 10:49 GMT

Associated British Foods looks to be dealing well with the economic downturn, especially in its ingredients division which, with the bulk of its business outside the UK, has benefited from the weak pound.

The UK-based firm has reported an increase in group revenue of 21 per cent in its first quarter management statement (to 3 January), issued today – or 15 per cent at constant exchange rates. Specific figures have not been released at this juncture.

While the pound, which has reached record lows against the euro and the US dollar in recent months, has had a negative effect on sales values for firms doing business in the UK but reporting in other currencies, the situation has played in ABF’s favour.

Revenue from the ingredients division was up 25 per cent on the prior year quarter – although at constant currency rates the increase was only 8 per cent. Even so, the company said: “Our yeast and bakery ingredients business is trading well with higher volumes and improved pricing.”

Indeed, higher prices implemented in 2008 in order to counter increasing costs are now filtering through to goods sold now. For instance in September AB Enzymes upped the price of its baking, food and specialty enzymes by up to 10 per cent, to offset increased costs of raw materials, energy and overheads.

ABF’s ingredients division consists of AB Mauri, which makes yeast and bakery ingredients, and AB Ingredients (ABI). ABI is, in turn, made up of AB Enzymes; emulsifier firm ABITEC; yeast firm Ohly and Ohly Americas; PGP International, which makes grain-based extruded ingredients; and Protient, which makes whey protein ingredients.

Sweet results for sugar

On the sugar side, revenues were seen to be 20 per cent up on the same period of last year – an increase explained by “good performance” from both British Sugar and Illovo, although Illovo’s volumes were lower than anticipated. African Illovo is currently in the second phase of capacity expansion in Zambia.

The company said that: “Both the UK and Poland have… benefited from the strength of the euro and firmer pricing than expected.”

The most significant news on the sugar front, however, has been ABF’s agreement to acquire Azucarera Ebro for €385m. The transaction is subject to regulatory approval, and ABF expects it to close in the spring.

Oils in the USA

Another major move announced by ABF in the last months is the new venture with Archer Daniels Midland to market and distribute packaged vegetable oil products in the US and Canada.

The two companies are pooling their expertise and resources to create Stratas Foods, which will serve the specialty food ingredient, foodservice and retail private label bottled oil markets.

The aim is to build on the origination and processing capabilities of ADM, and the sales and marketing expertise of ACH Food Companies (ACH), a wholly owned subsidiary of ABF.

ABF announced the closure of its ACH processing plants in December, during 2009 production will transfer to the ADM facilities.