ABF growth dampened by sugar price drop

By Rod Addy

- Last updated on GMT

Tea sales were strong at ABF during its first financial quarter
Tea sales were strong at ABF during its first financial quarter

Related tags Associated british foods

Plunging world sugar prices hampered sales growth for Associated British Foods (ABF) in the first quarter of its current financial year, but its Twinings and Allied Bakeries brands delivered strong performances.

In an interim management statement covering the 16 weeks to January 4, the international food and clothing group said group sales had been flat, or, allowing for fluctuating currency rates, 1% up.

“Twinings Ovaltine again performed well with strong growth for tea in the US and the UK,”​ the company claimed. “Sales by the UK grocery businesses were in line with last year. Volumes and margins at Allied Bakeries were ahead of last year but continued to face strong competition.

“Sales at Silver Spoon declined as a result of lost contracts and reduced UK sugar pricing but the profit impact has been partially mitigated by overhead cost reduction.”

 Overall sugar sales fell by 27% in constant currency terms, driven principally by lower prices, ABF said.

‘Further pressure’

“World prices continued to fall to 15.5c/lb (which surely is unsustainable in the long term) and this is expected to put further pressure on revenue and margins, particularly in China,”​ said Panmure Gordon analyst Graham Jones.

In its statement, ABF added: EU sugar prices, as previously indicated, were lower in the period which will lead to lower revenues and margins for both the UK and Spain in the full year.”​ 

Lower sugar prices would result in substantial reduction in profit from sugar for the group across the year, it said. However, it stressed the group’s UK sugar production was expected to increase from 1.15Mt last year to 1.28Mt. 

Grocery and ingredients divisions had also performed well over the period, said Jones. Grocery sales rose 2% in constant currency terms, but fell 1% in actual terms as a result of the weaker Australian dollar.

Jump in pre-tax profit

Meanwhile, Jones forecast a jump in pre-tax profit for the year from £27M to £35M for ingredients.

The group’s Primark clothing division exhibited “a fantastic looking Christmas trading performance” ​as well, he added.

“In our view this is an impressive start to the year, once again in Primark, but also with an improvement in both Australia and ingredients showing through,”​ he concluded. “The steeper fall in profits in sugar is disappointing, but reflects exceptionally low world sugar prices.”

He also highlighted the impressive cash flow ABF had achieved in the period, with net debt having fallen by £392M from the year-end to £412M. “As such we reduce our year-end debt forecast from £648M to £602M.”

Related news

Show more

Related products

Your partner in plant-based meat alternatives

Your partner in plant-based meat alternatives

Content provided by ADM | 15-May-2024 | White Paper

Harness our technical expertise and world-class portfolio of high-quality ingredients and formulations to create elevated, chef-driven, plant-based meat...

Oat Beta-glucan – Clean Label Texturizer

Oat Beta-glucan – Clean Label Texturizer

Content provided by Lantmännen Biorefineries AB | 21-Nov-2023 | White Paper

In today's health-conscious world, consumers seek transparent labels and natural ingredients.

Follow us


View more