Adjusted operating profit rises at ABF in year

by Eric Schroeder
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LONDON — Adjusted operating profit at Associated British Foods P.L.C. increased 17% to £1,077 million ($1,721 million) in the year ended Sept. 15, up from £920 million in the same period a year ago. Revenues rose 11% to £12,252 million ($19,580 million) from £11,065 million.

ABF said its results benefited from strength in its sugar business, which received a boost from a strong European commercial market and better sugar yields across southern Africa.

The company’s grocery division, which includes U.K. bakery brands Kingsmill and Ryvita, suffered a drop in profits to £187 million ($299 million) from £244 million. The company attributed the decline to significant restructuring changes at Allied Bakeries in the United Kingdom, as well as at George Weston Foods in Australia.

At ACH in the United States, vegetable oil volumes increased, benefitting from a recent price reduction, while home baking and spices volumes were flat, ABF said.

“Oil costs remained high for most of the year but sales and margins recovered from last year’s levels,” the company said. “Continued increases in raw material costs, with an inability to recover them fully, impacted margins in the flavors business. Significant investment was made during the year in new product launches in baking and in the sauces/marinades category, capitalizing on the strength of the ACH brands.”

ABF’s ingredients business suffered a 48% drop in profits to £32 million ($51 million) from £61 million, mainly due to restructuring changes at AB Mauri and increases in raw material costs, particularly in European markets.

“In the past year, AB Mauri made substantial progress in identifying the capabilities needed to deliver a more differentiated bakery ingredients proposition,” the company said. “It is now applying this understanding to each of its businesses, ensuring that it is adapted to meet their distinctive market requirements. Capital investment by AB Mauri during the year included the construction of new yeast plants in Mexico and Shandong province in China together with the expansion of dry yeast capacity at Xinjiang in China. The plants in China have been commissioned, and the Mexican plant will be operational during the first half of next year.”

In the United States, ABF said extruded grain products enjoyed strong growth driven by an enhanced range and customer service and an expanded customer base.

“Production at the existing facility in California is nearing capacity and with increasing demand, a new facility is to be built in Evansville, Ind.,” the company said. “The results of the U.S. dairy business improved driven by high lactose and whey protein prices. Yeast extracts are now supplied to Europe from the new, fully commissioned, factory in Harbin, China, and new business is being developed in the Chinese and Asian markets. The yeast extracts facility in Hamburg was upgraded during the year enabling it to expand into new market sectors and, after a period of operational challenge, the U.S. business made a number of efficiency improvements and is back in growth.”

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