Operating losses at Allied Bakeries, which last year lost its largest own-label contract, have fallen in the past six months.
Despite a decline in revenue, losses at the bakery business have been reduced by cost-cutting, reported Allied owner Associated British Foods (ABF) in an update ahead of its close period for interim results for the 24 weeks to 29 February 2020.
ABF wrote 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.
In last year’s annual results, published in 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 and would implement cost reductions in a number of areas.
Workers at the Allied site in Belfast last week voted to end industrial action after a “significantly” improved pay offer from the company.
In today’s (24 February) trading update, ABF stated: “As expected, Allied Bakeries revenues declined but the operating loss was reduced with our ongoing programme of cost reductions more than offsetting the loss of contribution from lower sales.”
ABF also reported that the major fire at its Speedibake factory in Wakefield had resulted in “significant damage”. It added it has comprehensive insurance for property damage and business interruption.
ABF said first-half revenue from its ingredients division was expected to be ahead of last year, although adjusted operating profit will decline.
“AB Mauri will deliver sales and operating profit growth,” it stated. “The US business performed well, with strong sales growth in yeast and profit also benefiting from operational efficiencies. Italmill, the specialist bakery ingredients business acquired in May last year, was successfully integrated. Sales of our high-quality bakery toppings from our new facility in Brazil were ahead of expectations.”