ABF profit hit by £30M by weakened euro

By Laurence Gibbons contact

- Last updated on GMT

A Weakening of the Euro has hit ABF's operating profit
A Weakening of the Euro has hit ABF's operating profit

Related tags: Euro, United states dollar

Associated British Foods (ABF) has revealed its adjusted operating profit will fall for the 52 weeks to September 12, by at least £30M, due to a significant weakening of the euro.

A decline in operating profit in sugar and negative currency factors arising from the strengthening of the sterling and the US dollar and the weakening of the euro would hit profits, ABF claimed.

“Our earnings expectation for this financial year continues to reflect a modest decline in adjusted earnings per share for the group for the full year,”​ the firm said in a statement. 

“The group is diverse and multinational with operations and transactions in many currencies, and as a result has both translational and transactional currency exposures.

‘Weakened significantly’

“Since our half year, and particularly in recent weeks, local currencies in our emerging markets have weakened significantly.”

ABF’s grocery division’s operating profit was expected to be ahead of last year with an increase in margin, but revenue will be lower driven by commodity price deflation.

ABF has been hit by a decline in both sugar and bread prices, it added.

Revenue and adjusted profit for AB Sugar would be “substantially lower”​ than the previous year driven by the further decline in European sugar prices, ABF said.

ABF brand by brand results

  • Twinings Ovaltine grew market share and increase profit
  • Dorset Cereal traded ahead of business plan
  • Jordans performed well
  • Ryvita crispbread sales were lower in competitive market
  • Patak’s and Blue Dragon maintained positions as category leaders

Despite benefits from “significant reductions”​ in overheads, these could not compensate for the impact of lower prices, it added.

World sugar prices fell to below 11.0 cents per pound, the lowest in more than six years.

Sugar prices

ABF said: “Sugar prices in the EU have now stabilised and with quota stock levels reducing back towards historic norms, we expect to see some price recovery during 2015/16. 

“UK sugar production of 1.45M tonnes was driven by very high beet yields and excellent factory performances.  The UK crop for the 2015/16 season has made good progress but, with a reduction in the contracted area under cultivation in excess of 20%, and a return to more typical beet yields, sugar production is expected to be just short of 1.0M tonnes.” 

Despite sales volumes at Allied Bakeries increasing over the financial year, the UK bread market has continued to be “very challenging” ​and lower bread prices resulted in a reduction in profitability, ABF claimed.

“The Kingsmill brand was relaunched in May and revenues from Sandwich Thins have continued to build following last year's launch,”​ it said.

“We have completed our major capital investment programme and this year have reduced waste, further improved production processes and manufactured products of a consistently high quality.”

 

 

Related topics: Business

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