Allied Bakeries owner Associated British Foods (ABF) is set to make further cost reductions at the troubled business.
ABF has already written off £65m and closed Allied’s Cardiff bakery following the loss of a contract to supply own-label bread to Tesco. Although Cardiff will continue to be used as a distribution centre, almost 180 staff have been made redundant as a result.
The bakery business, which produces the Kingsmill and Allinson’s brands, has been making a loss for a number of years.
Managing director Jon Jenkins left the business in June and Allied has switched to a joint leadership structure under Liam McNamara and Nick Law.
In its annual results, published today (5 November), ABF reported that Allied had agreed price increases with some of its customers.
It also explained that, as a result of losing the Tesco contract, it had taken steps to reduce capacity. During the coming year, it is set to implement cost reductions in a number of operational areas.
“At Allied Bakeries we are committed to reducing the operating losses this coming year, with a programme of cost reductions,” added ABF chief executive George Weston.
Across the ABF Grocery division, which includes Allied, revenues rose 2% year on year at constant currency, and growth in adjusted operating profit was 10%.
Revenue in the ABF Ingredients division rose 4% at constant currency, but adjusted operating profit fell 6%. The slump was driven by AB Mauri Argentina due to a challenging economy and increased competition.
This hit profits at AB Mauri, although ABF reported strong trading in North America following product innovation in bakery ingredients and the increase in yeast prices to recover higher costs.
Profit also fell in ABF’s sugar business, mainly due to the effect of a further decline in EU sugar prices last year following regional oversupply and the end of the EU sugar regime. The company said it expected improved sugar profit in the coming year following price increases.