Associated British Foods (ABF) has said the UK bakery market “remains intensely competitive” and expects Kingsmill owner Allied Bakeries’ profit to be lower than last year as a result.
ABF’s preclosing statement for its interim results to 28 February 2015 comes after the price of several branded and supermarket own-brand loaves were slashed to just 75p. Last week Sainsbury’s cut the price of 800g Hovis white and wholemeal and 750g Best of Both loaves to 75p, as well as nine of its own-label loaves from 75p to 55p, according to British Baker’s sister title The Grocer.
The statement said: “The UK bakery market remains intensely competitive, with a combination of over-capacity in the industry driving manufacturers towards marginal pricing, and retailers seeking to prove their value credentials in essential shopping items such as bread.
“As retailers drive for value and range simplification, already tight margins have come under further pressure and Allied Bakeries’ profit will be lower than last year as a result.”
Elsewhere, ABF reported that its underlying trading remained in line with expectations, with revenue from its sugar segment “substantially lower” than last year in the first half of the year, though profitability is expected to be close to break-even. EU sugar prices have been lower in the period leading to lower revenues and margins for both the UK and Spain, though there has been some stabilisation of late. AB Sugar has focused on managing its cost base with improvement programmes across all businesses, overhead reduction and lower beet and cane costs.
A “marginal decline” is expected in adjusted earnings per share for the group for the full year.
Since its acquisition last October, Dorset Cereals has traded well and its integration with Jordans Ryvita is on track.
ABF’s interim results to 28 February 2015 are scheduled to be announced on 21 April.