Associated British Foods (ABF) has posted a decline in operating profit for its ingredients and grocery divisions this morning.
In its interim results for the 24 weeks ended 3 March 2012, ABF said its ingredients business, which includes yeast and bakery ingredients manufacturer AB Mauri, saw a £13m decline to £18m. Revenue grew by 2% to £538m.
ABF’s grocery division, including the Kingsmill bread brand, reported a 4% growth in revenue to £1.8bn, but a £34m decline in operating profits to £75m. The company said this was primarily driven by restructuring costs at Allied Bakeries in the UK, in addition to George West Foods in Australia.
In a company statement, Charles Sinclair, chairman of ABF, said: “Allied Bakeries continued its focus on lowering its cost base, with further capital expenditure in its bakeries and it also took a one-time overhead reduction charge. In ingredients, a continuation of input cost pressures and increased competition, combined with a rationalisation charge, reduced operating profit in the yeast business.”
The company has said that the construction of a new bread plant at its Stockport bakery is in progress and due to begin commissioning in June, with a rationalisation charge taken into account for its financial results because of the closure of two smaller bakeries and the cost of further overhead reductions.
Group revenue was up 11% to just over £5.76bn, while adjusted operating profits rose by 6% to £412m and profit before tax increased by 3% to £363m. Operating profit saw a 6% boost to £378m, with basic earnings per share up 4% to 31.7p.
George Weston, chief executive of ABF, said: “The group delivered good growth in revenue and profit. AB Sugar and Primark both performed strongly, demonstrating continuing momentum. We expect substantial growth in both adjusted operating profit and adjusted earnings per share for the group for the full year.”
Sinclair added: "AB Sugar’s investment over recent years, its focus on maximising capacity utilisation and operational efficiency and the strength of regional sugar prices, are expected to drive the full-year profit for Sugar well ahead of last year. This, together with strong profit growth from Primark in the second half, should more than offset the lower profit in grocery and ingredients. We continue to expect this to result in substantial growth in both adjusted operating profit and adjusted earnings per share for the group for the full year.”