Associated British Foods’ bakery business’ profits set to decline10 September 2012
Adjusted operating profit is set to decline at the grocery division of Associated British Foods in its year to September 15 as margins decline at Allied Bakeries in the UK.
The food giant said UK consumers are increasingly promotionally driven which is cutting Allied Bakeries' margins.
It said: “UK consumers have continued to seek value from product choice, promotions and price as there has been little easing of the pressure on household incomes. The market remained intensively competitive for Allied Bakeries with promotional activity reducing margins.”
The recent increase in wheat costs will place further pressure on margins according to Associated British Food. It said “good progress” had been made in reducing its cost base as it closed two small bakeries and made moves to cut overheads.
Associated British Food also revealed that the “difficult retail and competitor environment” was having an impact on its Australian business, George Weston Foods. It has restructured over the year which will impact its profits.
Meanwhile, Associated British Foods' Jordans and Ryvita brands have performed strongly over the year due to effective advertising.
Its ingredients business’ operating profits are also set to be “sharply lower” this as a result of operational challenges faced by its yeast and bakery ingredients division AB Mauri.
The European yeast market was “extremely competitive” over the year and margins remained constrained as it was unable to recover fully raw material cost increases.
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