Allied Bakeries is continuing to reduce its losses – and will be looking to mitigate the impact of rising wheat prices.
The bakery business, which made a loss in its 2017 financial year, is making “some progress” in reducing this through cost reduction programmes and price increases, reported parent company Associated British Foods (ABF) in an update ahead of entering a close period for its full-year results for 2018.
Own-label bread is continuing to increase its share of the market, said ABF, which has invested in a number of launches under its Kingsmill and Allinson’s brands in the past year.
These have included 410g unsliced premium Allinson’s loaves and Kingsmill Super Seeds loaves made with a selection of seeds, including linseed, sunflower, poppy and pumpkin.
In addition, the division’s Speedibake business opened an expanded doughnut facility and continued its focus on cost control.
Allied has been impacted by the increase in wheat prices this summer as a result of extreme weather conditions. In July, total wheat yield was forecast at 2.4% below the five-year average across the EU-28 countries, according to the latest European Commission MARS crop monitoring report.
“Wheat prices increased significantly over the summer as a consequence of a reduction in global production,” stated ABF in its trading update. “The impact of this on our costs will be reflected in our ongoing discussions with our customers.”
ABF reported growth in its ingredients businesses, with division revenues ahead of last year and operating profit “well ahead” with a further increase in margin.
AB Mauri, which this year acquired Holgran and Fleming Howden from Hovis, delivered another year of growth in both yeast and bakery ingredients, said ABF.
“North America benefited from a full year of ownership of the Speciality Blending business acquired in 2017, cost reductions in yeast manufacturing and sustained growth in bakery ingredients,” stated the update.
“Our Latin American businesses have grown despite ongoing economic difficulties and competitive pressures. The operation in Argentina opened its new bakery ingredients plant in Lanus in the year. Trading performance in EMEA continued to be strong and further investments were made in research and development.”
Its enzymes business had benefited from innovation and investment in production capacity at Rajamaki, Finland, said the firm.
Across its total business, ABF said its full-year outlook was unchanged, with growth expected in adjusted operating profit. Strong profit performances this year from its Primark, grocery, agriculture and ingredients were expected to more than offset the impact of lower EU sugar prices.
ABF is scheduled to announce its results for the 52 weeks to 15 September 2018 on 6 November 2018.