The company published its interim management statement this morning for the 40 weeks ending 23 June 2012, revealing a 2% drop in revenue for the ingredients business for the third quarter on last year. ABF reported a 1% increase in the division year-to-date on a cumulative basis.
In a statement, ABF said: “The operational challenges faced by AB Mauri in the first half have continued in southern Europe and Asia. Margins remained under pressure from higher input costs and volume weakness. The new yeast facility in Shandong province in China and the expansion of the dry yeast plant at Xingjiang were both successfully commissioned in the period and construction of the new yeast factory in Mexico is progressing in line with expectations.
“At ABF Ingredients, the dairy proteins business continued to benefit from a strong dairy market, with high lactose and whey protein prices. Product innovation drove growth in the feed and bakery enzymes businesses, which performed well.”
ABF saw a moderate 3% year-on-year (YOY) growth in its grocery division for the period, which includes such brands as Ryvita.
Revenue remained flat for ABF’s groceries business during the 16 weeks to 23 June 2012, compared to last year.
ABF said the market remained “intensively competitive” for its Allied Bakeries business, which produces Kingsmill bread, with promotional activity reducing margins.
Graham Jones, executive director at Panmure Gordon, said: “ABF’s Q3 interim management statement confirms that it expects to deliver substantial profit growth for the year to September 2012, firmly underpinning our forecast of 15.6% earnings per share (EPS) growth to 85.5p. We remain confident in our 2013 EPS forecast of 91.2p, but we think the 9% devaluation of the euro, versus its average against sterling in fiscal 2011, should put a cap on upgrades to forecasts for the time being."
ABF said its cash outflow before funding in the year-to-date was lower than 2011, with “the benefit of higher profit, a lower working capital outflow and lower capital expenditure”.
The firm has managed to reduce its debt in Q3 2012 compared to last year by more than £200m since the half-year. Total net debt for the year-to-date was below £1.4bn. ABF said a further reduction is expected by the year end.
Looking forward, ABF said the group is on track to deliver substantial growth in both adjusted operating profit and adjusted earnings per share for the full year.
ABF recently acquired ethnic flour business Elephant Atta from Premier Foods for a £34m cash consideration.