Pre-tax profit for the company fell to £515m in the 24 weeks to 2 March 2019, compared with £603m in the same period in 2018. ABF’s sales fared better, up 1% to £7.53bn for the period.
Sugar profits plummeted in the first half of the year, with ABF reporting a 99% drop to £1m against sales of £769m – down from £881m in the previous year. The company attributed the fall to lower EU contracted sugar prices, as well as a poor crop in China and a later “phasing of profit” in Illovo this financial year.
“We expect the profit decline for the full year to be reflected in this first half and for second-half profits to be in line with those achieved in the second half last year,” said ABF. “Operating profit for the full year remains in line with our expectations.”
Grocery saw the greatest growth among the company’s food businesses, as it reported a 5% rise in adjusted operating profit to £167m. Sales for the division were also up 3% to £1.7bn, despite adopting the new IFRS 15 accounting standard that reduced revenue by £16m.
Key brands driving sales across the division included George Weston Foods in Australia, a full half-year contribution from recently acquired Italian vinegar manufacturer Acetum, Twinings Ovaltine and pricing at Allied Bakeries.
The impact to sales from the loss of Allied Bakeries’ largest own-label bread manufacturing contract with a major retailer will not be felt until the next financial year.
‘Robust set of results’
Commenting on the results, chief executive George Weston said: “This is a robust set of results. Profit at AB Sugar was substantially reduced but, from this period, we expect our sugar profitability to improve.
“The strong underlying growth in Grocery profits demonstrates good momentum. Primark delivered excellent profit growth, driven by further development of our customer experience and selling space expansion.”
Shore Capital analyst Darren Shirley said ABF’s results were in line with expectations, with its sugar and grocery divisions’ earnings before interest and tax better than expected. Sugar, especially, was expected to report a loss of £7m. He reiterated Shore’s buy recommendation for the manufacturer.