ABF forecasts better grocery profits

25 February, 2013

Associated British Foods (ABF) has said profits within its grocery division will be “substantially improved”, benefiting from the non-recurrence of restructuring costs in Allied Bakeries.

Ahead of its interim results to 2 March, due to be announced on 23 April, the company issued a pre-close period trading update this morning. ABF said it expected net debt to be more than £300,000 lower than a year ago at some £1.25bn.

In a company statement, ABF said: “The UK bread market remained highly competitive. The worst UK harvest of recent years resulted in low volumes of wheat, which was also of inferior quality, but Allied Bakeries continued to produce high-quality bread and recovered the higher cost through price increases.

“The new bread plant at Stockport has been operational since September and work is on track to commission the new plant at Walthamstow in early summer.”

The firm added that UK revenues within its sugar business were ahead of last year, with higher sales volumes which it said was “compared with last year’s abnormally low level at the beginning of the financial year, and marginally higher sugar prices”.

In addition, ABF said revenue within its ingredients business in the first half is expected to be in line with last year, although 6% higher at constant currency, with further growth achieved with bakery enzymes driven which it said was “driven by new products launched last year”.

Graham Jones, analyst at Panmure Gordon, said: “Yeast has been a difficult area for ABF in recent years, and the new management appears to have stabilised the business. Productivity improvements and lower costs have been seen in China and the opening of a new factory in Mexico means some rationalisation of dry yeast capacity, which we assume will incur a £10m charge.

“As such we forecast Ebitda at £9m in H1, versus £18m last year. ABF Ingredients continues to perform well and agriculture profits should also be ahead.”





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