ABF sugar profits will be “substantially ahead” of last year
In a trading update ahead of the publication of its full-year results in November, ABF said its UK sugar business was expected to deliver “a very good second half result, following an excellent first half campaign”.
Its Spanish business, Azucarera Ebro, had also had a better second half “having sold the high-cost inventory that had been brought forward from the prior year, in the first half”.
However, heavy rainfall in Spain earlier in the year had resulted in a reduced beet crop in the south and a lengthened campaign in the north, which would constrain its full-year performance.
At Illovo in South Africa, profit had been affected by the weakening of currencies outside South Africa on the translation of results; the impact of lower world prices and the rand's strength on exports; and the effect of a weakening euro on exports to the EU.
However, profitability in China had improved significantly.
Grocery: a mixed bag
The grocery division would report “modest revenue growth in the second half with good results from our UK businesses being partly offset by a disappointing performance from George Weston Foods in Australia”, said the firm.
In the UK, Allied Bakeries had “enjoyed considerable success” with its Little Big Loaf, which was launched last autumn, said ABF, but higher wheat costs would put pressure on margins next year.
Meanwhile, Twinings Ovaltine had maintained the sales and profit growth achieved in the first half "with particularly encouraging progress in North America and the UK", said the firm. "Ovaltine continued to build on its success in Thailand and has achieved strong growth in developing markets.”
Silver Spoon sugar benefited from increased demand for home baking ingredients, while volume growth post the recent relaunch of Patak’s was sustained into the second half, with export volumes also showing “positive momentum”, it said.
“The first half improvement in trading at Jordans Ryvita has continued into the second half, particularly for Country Crisp.”
City: ‘the usual swings and roundabouts’
Shore Capital analyst Clive Black said the results were impressive: “In the main, UK and Twinings Ovaltine have performed well with improved sales and margins, though Australia continues to hold back profits with meats sales and margin falling in the second half.”
As for the EU sugar business, the outlook was “very firm”, he added. “As expected, sugar profit will be substantially ahead year-on-year, with management highlighting the trends previously reported have remained in place.
"So, a good EU campaign, improved Spanish profits (held back by weather) and a strong recovery in China, driven by firmer pricing. We believe Illovo (in South Africa) has performed well operationally, though weather and currency will have an adverse impact on profitability.”
Investec Securities analyst Martin Deboo said the figures reflected “the usual swings and roundabouts, which we read as more or less consistent with our forecasts. China sugars performance is improving, while margins in George Weston Foods in Australia are under pressure.”
