Weak bakery fails to halt ABF growth

By Catherine Boal

- Last updated on GMT

Related tags: Food

After a problematic year involving tampering incidents and
disappointing bread sales, UK food producer Associated British
Foods (ABF) has posted a 7 per cent rise in profits which the group
attributes to increased investment and acquisitions.

Operating profits at the group reached £272 million (€400.5m) thanks in part to a strong performance from its newly-extended sugar division, the easing of commodity costs and overseas business. However the optimistic results were not helped by a poorly performing bakery division. Operating profit for ABF's grocery portfolio fell from £84 million (€123.6m) to £64 million (€94.2m) over the past year. A competitive UK bakery market dampened sales and slowed recovery from high wheat prices caused by the summer heatwave. Group chairman Martin Adamson said: "This half year shows the early benefits of the investment made last year and has been a period of considerable activity which has seen the group perform well against a backdrop of challenging market conditions." ​ ABF-owned Allied Bakeries has suffered from a variety of setbacks in the past year - not only have sales dampened due to flagging bakery brands but incidents of malicious tampering at the company's Kent plant in the UK specifically targeted the Kingsmill range. The UK's Food Standards Agency was called in after the discovery of deliberately-planted foreign objects in sliced loaves. At least five cases of tampering occurred involving bits of glass and sewing needles. The sabotage will have damaged consumer confidence in the brand which has been slipping over the past year. According to research from AC Neilsen, sales of the third largest UK bread brand dropped 4.9 per cent from £296.9 million (€441.6m) to £282.3 million (€419.9m). ABF are hoping the line will be able to recoup lost sales with new product formulation, re-sized loaves and revised packaging supported by a £10 million (€14.8m) advertising campaign. Boosting ABF figures while the bakery business regains its footing is the sugar division. Today's interim results incorporate, for the first time, contribution made from Illuvo - Africa's largest sugar producer, 51 per cent of which was acquired by ABF in September last year. Illuvo joined a sugar portfolio that includes British Sugar, several Polish operations and other facilities scattered around the globe. It now supplies Fair Trade sugar to UK business Billington's. According to ABF, all sugar operations showed strong growth in the first half despite rocky trading conditions due to ongoing EU sugar reform and a recent EC-imposed withdrawal in quotas. Profits generated from the sugar division rose 64 per cent and doubled primary food revenue to £579 million (€852.4m).

Related topics: Markets

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