News

ABF sees revenues rise

16 Jan 2017

Group revenue from continuing operations for the 16 weeks ended 7 January 2017 was 10% ahead of the same period last year at constant currency, with good growth delivered by all of its businesses.

Associated British Foods (ABF) has issued a trading update for the 16 weeks to 7 January 2017 summarising the significant trading developments since the last market update.

Group revenue from continuing operations for the 16 weeks ended 7 January 2017 was 10% ahead of the same period last year at constant currency, with good growth delivered by all of its businesses. As a result of the weakening of sterling in late summer last year, sales from continuing operations at actual exchange rates were strongly ahead with a 22% increase.

AB Sugar revenue from continuing operations was 22% ahead of last year on a comparable basis at constant exchange rates. At actual exchange rates revenue was 38% ahead. Higher sugar prices, increased production in Africa, and further benefit from the performance improvement programme delivered a substantial increase in profit.

With 2016/17 forecast to be a second year of global sugar deficit, world prices are much higher than last year. A tightening of EU stock levels has strengthened domestic prices across the region and in Africa, higher world prices and the strength of the US dollar have resulted in higher domestic and regional prices.

In the UK, production is projected to be just under 900,000 tonnes as a result of a smaller beet crop and yields marginally lower than last year. Sales are now largely contracted for this year and with higher prices, lower beet costs and a weaker sterling/euro exchange rate, British Sugar’s full year operating result will improve substantially.

Azucarera in Spain is expected to produce some 390,000 tonnes of sugar from beet. In response to strengthening customer demand and partly to compensate for a lower volume of beet sugar, the Guadalete refinery will be substantially utilised this year. The operating result will also benefit from higher sugar prices.

In China, ABF completed the sale of its five cane sugar factories to a consortium led by Nanning Sugar on 22 December 2016 for total proceeds, including debt assumed, of Rmb2.6bn (£297m). Tax arising on the transaction is not expected to be material. ABF’s two beet factories in north China at Zhangbei and Qianqi, are said to be operating well and will process a record beet crop. Combined with higher prices, this business is expected to deliver a much improved profit this year.

Illovo has made good progress following last year’s weather related crop shortfalls and production this financial year is expected to improve to 1.7 million tonnes compared with 1.4 million tonnes for the same period last year. Revenue increased substantially driven by higher volumes and prices, and benefiting from the introduction of new consumer pack sizes. Cost reduction from performance improvement initiatives in Zambia and Malawi substantially mitigated local inflation.

Revenue at AB Agri was higher than last year with progress made in all of its businesses. AB Mauri and ABF Ingredients both achieved good revenue growth and margin will again show substantial improvement.

ABF said its outlook is unchanged with progress expected in adjusted operating profit and adjusted earnings for the group for the full year.