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Allied Bakeries could lose £30M as flour prices eat into profits

By Elaine Watson , 10-Sep-2007

Allied Bakeries could lose £30M this year thanks to rocketing flour prices, analysts have predicted.

Parent company Associated British Foods (ABF) declined to give figures, but confirmed that “grocery profits will be lower than last year, primarily as a result of the losses incurred by Allied Bakeries, charges for factory rationalisation in ACH and Blue Dragon and adverse currency translation”

The price of its Kingsmill bread brand would also have to rise again, it said. “The recent relaunch of Kingsmill has increased volumes and market share, but a further bread price increase is now required to recover the recent sharp increases in the cost of flour.”

Currently, a Kingsmill standard white loaf costs 96p, while Hovis, which is owned by rival Premier Foods, charges more than £1.

Margins at ABF had also been impacted by the rising cost of vegetable oils, said the firm.

However, “Twinings and Ovaltine continue to deliver strong growth with the benefit of the marketing investment in their strategic markets.”

It added: “Since the half year we have started the restructuring of G Costa with the intended relocation of manufacturing to Poland and work is underway to bring together the Patak’s and Blue Dragon businesses.”

Prices of breadmaking wheat have almost doubled over the last 12 months to £200/t; starches are up 30% and yeast prices have seen double-digit growth.