ABF profits continue to suffer from bakery business

By Karen Willmer

- Last updated on GMT

Related tags Abf Sugar beet Profit

Grocery profits for Associated British Foods (ABF) will be lower
than last year due to the problems with its Allied Bakeries
business, the company has said in its trading update yesterday.

ABF said the re-launch of the UK Kingsmill bread brand in February helped improve the Allied Bakeries performance, however prices will have to be raised again in light of the increase in the price of flour. In Australia, the company said the milling and baking businesses have "performed well"​ and there was an improvement in the meat business. In North America, the cost of vegetable oil also affected the company's margins in its ACH unit, ABF said. ACH produces vegetable oils and corn syrups, among other products. However, "record"​ sugar crops and "firm prices"​ meant the company saw an increase in profit in its China sugar business. "The development potential of our sugar businesses has been reinforced with the announcement of the agreement to form a joint venture with BP and DuPont to build a world scale bioethanol plant in the UK and the investment in the beet sugar industry in Northern China with the creation of the Bo Tian joint venture,"​ ABF said today. Currency translation also affected profit, the company said, particularly within the ingredients businesses. Yeast sales continued to grow in South America and SW Asia, and South American expansions for the yeast business were complete, ABF added. "Yeast extracts, proteins and enzymes demonstrated good growth and will benefit form the capacity added in the second half,"​ said ABF today. Despite poor weather affecting the overall clothing retail market, ABF said sales and profit at Primark will be "substantially ahead"​ of last year. Like-for-like sales growth in the second half is expected to be 1 per cent within the Primark business. "Overall sales growth will be ahead of that achieved in the first half although operating profit margin will be affected by the predicted increase in depreciation arising from the investment in stores and by a higher level of discounting,"​ ABF continued. Earlier this year, ABF took over a Phillipino bakery business as well as other steps to expand into growing markets within Europe and the US. However, the company did struggle earlier this year when bakery operations in the UK were disrupted due to foreign objects being found within its bread. ABF announced a 7 per cent rise in full year profits to £272m in 2006, despite a weak performance by Allied Bakeries.

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