ABF trading update shows sugar and ingredients growth

By Sarah Hills

- Last updated on GMT

Related tags: Associated british foods

The sugar and ingredients divisions of Associated British Foods (ABF) are expected to show good growth backed favourable foreign exchange rates when its interim results are announced in April.

ABF has issued a trading update prior to the close period for its results to 28 February 2009, which it said will show that the group’s operating profit for the half year will be slightly lower than last year.

Specific figures have not yet been released but profit from Sugar is said to be ahead of last year with ABF’s European businesses and Illovo business more than offsetting a decline in China.

An ABF spokesperson told FoodNavigator.com it had benefited from the EU Sugar Reform, which aimed to improve competitiveness and market-orientation of the EU sugar sector and guarantee its long term future, as the UK had an excellent campaign”.

Meanwhile its Ingredients businesses are almost entirely located outside the UK, which means it benefited significantly from the weakness of sterling against the US dollar and the euro.

There was also a better than forecast result in Agriculture but ABF said its Grocery arm will show a decline on last year with a “substantial margin reduction”​ at its wholly-owned subsidiary ACH Food Companies (ACH).

The UK-based firm added that the impact of consumer down-trading on a number of its businesses more than offset good performances by Twinings Ovaltine and Allied Bakeries.

The company’s retail arm, Primark is also expected to deliver strong results.

Sugar

ABF said in the statement: “In the EU, the UK business has had an excellent campaign and the sugar crop, estimated at 1.2 million tonnes, is higher than expected.

“The operations set new performance records and profit benefited from a much lower net energy cost.”

It said that the Glinojeck factory in Poland performed well but total production was lower than last year at 165,000 tonnes with disappointing beet yields.

Illovo’s profit increased but sugar volumes were lower than anticipated following dry spells, particularly in South Africa and Tanzania. Meanwhile African Illovo’s capacity expansion in Zambia is “progressing to plan”​.

But profitability in China will be significantly reduced by much weaker sugar prices resulting from the high level of sugar stocks in the industry that were brought forward from last year’s record crop.

Ingredients

ABF’s ingredients division consists of AB Mauri, which makes yeast and bakery ingredients, and AB Ingredients (ABI) which includes AB Enzymes; the yeast firm Ohly and Protient, which makes whey protein ingredients among others.

Higher prices were implemented in 2008, such as AB Enzymes raising its baking, food and specialty enzymes prices by up to 10 per cent to offset increased costs of raw materials, energy and overheads, and these have been filtering through to goods sold now.

ABF said growth in enzymes has continued with increased production capacity in Finland is expected to be fully operational in the spring.

At constant currency, AB Mauri made good progress in the half year. Yeast in Europe and South America benefited from increased volumes and prices but speciality whey proteins were further impacted by margin compression.

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