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ABF full year beats forecasts

10-Nov-2004

UK food and ingredients firm Associated British Foods has beaten full year profit expectations after posting double-digit growth against a backdrop of firmer commodity pricing and adverse currency movements. The performance underlines that ABF is well placed for future growth, writes Lindsey Partos.

ABF pulled in pre-tax profits of £525 million (€755m) on sales of £5.16bn, marking a 15 per cent rise on the previous year. Forecasts had predicted pre-tax profits in the £505 million range.

"These results again demonstrate our ability to deliver strong underlying profits growth from our businesses against a backdrop of adverse commodity pricing and currency movements," said ABF's chief executive Peter Jackson in a results statement today.

"We are well placed for future success with our new yeast business giving us further growth opportunities," he added.

Through the €1 billion purchase of Australian yeast giant Burns Philp announced in July this year, the maker of Twining and Ryvita brands and owner of British Sugar leapt into the number three yeast position for Europe and with it, strong potential earnings in a market currently topping 2.3 million tonnes and worth €1.16 billion annually.

"The global yeast market is growing at three to four per cent with particularly strong growth in developing countries - in China the market is moving at a 10 per cent pace," a spokesperson for ABF said at the time.

Yeast brands acquired through the Burns Philp acquisition include Mauri, Fleischmann and Calsa. The firm said this week that the bakers' yeast business will trade under the AB Mauri name.

The yeast market is soaring in developing countries, about 10 per cent in China, offsetting minimal growth in developed countries that posts around 1 to 2 per cent.

Growth in yeast will uplift the ingredients unit that saw sales decline by over 5 per cent from £311 million in 2003 to £294 million in 2004. But there are signs of a let-up in margins via relief in commodity prices and a move to value-added products as profit for the unit came in higher for 2004 to £36 million, compared to £32 million in 2003.

Strong growth from the US speciality food polyols business SPI and recovery at Cereform, the bakery ingredients business, helped to lift sales.

"SPI benefited from its focus on providing speciality low calorie sweeteners…and continued strong growth from sugar-free products," said ABF.

The recent acquisitions by the group, notably the Burns Philp purchase, are part of strategy to cut its exposure to imminent reforms to the European Union's sugar regime that are set to slice into profits at the firm's sugar group, British Sugar.

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