News

ABF profits from sugar price rise

3 Mar 2017

Associated British Foods has issued an update prior to entering the close period for its interim results to 4 March 2017 which are scheduled to be announced on 19 April 2017.

Associated British Foods has issued an update prior to entering the close period for its interim results to 4 March 2017 which are scheduled to be announced on 19 April 2017.

For the half year the company says it expects excellent progress in adjusted operating profit and adjusted earnings per share for the group. The trading outlook for the group for the full year is unchanged with progress expected in adjusted operating profit and adjusted earnings per share.

AB Sugar revenue from continuing operations will be well ahead of last year on a comparable basis taking into account the change in Illovo’s year end. Higher sugar prices, increased production in Africa, and further benefit from the performance improvement programme will deliver a substantial increase in profit.

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

In the UK, the beet crop is smaller than the prior year and, with marginally lower yields, production is projected to be just under 900,000 tonnes. The UK campaign was delayed in order to maximise the growth of the crop with production at Newark running into late February. With sales fully contracted for the year, firmer prices have been confirmed which, combined with lower beet costs and a weaker sterling/euro exchange rate, will drive substantial improvement in British Sugar’s operating profit. The new anaerobic digestion plant at Bury St Edmunds, which produces biogas from sugar beet pulp, became operational in the summer of 2016. The biogas is fed into a gas engine generating low-carbon electricity which then exports the renewable power to the national grid.

Revenues for ABF’s ingredients business in the first half are expected to be ahead of last year at constant currency and substantially ahead at actual exchange rates. Operating profit growth for the half year will be strong on both measures, with further recovery in yeast and bakery ingredients and another excellent performance from ABF Ingredients.

At AB Mauri, this has been achieved despite challenging economic conditions in a number of countries especially its important markets of Argentina and Brazil. The trading performance in Europe has been in line with last year with notable success for the recently opened UK Technical Centre which enables the development of new bakery ingredient solutions and provides technical support and training to customers. Asia is delivering a stronger performance this year following last year’s manufacturing rationalisation, and margin improvement in Australia has been achieved through overhead reduction.

Trading in North America has been good and in January ABF completed the acquisition of Specialty Blending, a bakery ingredients business located in Cedar Rapids, Iowa. The combination of this high-quality and well-positioned ingredients blending operation with AB Mauri’s global technology capability will strengthen its North American business, ABF said.

ABF Ingredients has had an excellent performance in the first half, the company says. Sales of feed enzymes were particularly strong and growth was also achieved in bakery, food and technical enzymes. Abitec in the US continues to strengthen its range of bioavailability enhancement solutions and ABF has also seen sustained growth in functional excipients and drug delivery systems in the US.