Solid Interim Growth By Associated British Foods
Associated British Foods has achieved a 5% rise in adjusted operating profit to £390m on group revenue ahead by 9% to £5.21b in the 24 weeks to March 5th 2011 as four of its five business segments improved profitability. Group profit before tax declined slightly from £320m in the first half of 2010 to £319m.
A feature of the first half of the current financial year has been the very large and continued increase in the price of a number of commodities which impacted on the group’s three food businesses – sugar, grocery and ingredients.
The rise in the world sugar price has benefited the sugar operations. Sugar profits in the first half were 27% higher at £108m on revenue up 10% to £1.02b with a substantial improvement in the operations in Spain and China. While world prices are expected to continue for the rest of this year but profit for the sugar businesses will be held back in the second half by the lower volumes produced. The damage to the UK sugar beet crop during the severe winter weather is expected to result in a net profit reduction of some £20m in the full year at British Sugar.
George Weston, chief executive of Associated British Foods.
In grocery, the impact of higher input costs on profit were offset by a combination of efficiency savings, brand and product development, and price increases. Grocery revenue increased by 8% to £1.73b and profit rose by 17% to £111m benefiting from a much reduced level of provisioning for the cost of manufacturing reorganisation. Twinings Ovaltine and the UK businesses performed well but George Weston Foods in Australia disappointed.
Profit from the ingredients businesses was lower than last year as a result of higher molasses prices and the cost of commissioning the new yeast extracts plant in China. Revenue increased by 7% to £544m but operating profit declined by 38% to £29m.
The Primark retail business and the agriculture division were the other two segments to improve profits.
“The breadth, diversity and resilience of our businesses have enabled the group to deliver good growth. We have made further substantial capital investment for the longer-term development of the group,” says George Weston, chief executive of Associated British Foods.
