ABF to post growth despite falling bakery sales

By James Ridler contact

- Last updated on GMT

Allied Bakeries' falling sales have impacted ABF's profits. Picture courtesy of ABF
Allied Bakeries' falling sales have impacted ABF's profits. Picture courtesy of ABF

Related tags: Finance

Associated British Foods (ABF) has predicted sales and profit growth ahead of last year, despite the negative impact of falling sales at Allied Bakeries.

Predictions of strong results for the year have been offset by continued lower sales at Allied Bakeries.

In a statement issued ahead of the manufacturer’s interim results, ABF said: “As expected, Allied Bakeries’ revenues declined, but the operating loss was reduced with our ongoing programme of cost reductions more than offsetting the loss of contribution from lower sales.

“At the start of February, there was a fire at our Wakefield Speedibake factory, resulting in significant damage. The site was safely evacuated, and we have comprehensive insurance for property damage and business interruption.”

Tea sales

Tea sales for the manufacturer were in growth, significantly boosted by herbal teas. Black tea was also in growth, despite reports from rival manufacturer Unilever that there was a “subdued consumer demand”​ for the drink.

The previous year’s tea results were also impacted by a £12m one-off cost for the closure of the Twinings factory in China.

ABF also saw success with its World Foods division, with Blue Dragon delivering strong sales in the UK and the Patak’s brand doing well in both Europe and North America.

The outbreak of Covid-19 (Corona virus) had a small impact on ABF’s food factories that operate in the country – AB Mauri, AB Agri and Ovaltine – which are running at reduced capacity, due to labour and logistics constraints. Sugar production in China was unaffected, as this year’s campaign was completed in January before the virus hit.

Sugar revenue

Sugar revenue in general was expected to be ahead of last year in the first half of 2020, thanks to higher EU prices. This – in conjunction with a reduction in the cost of sugar production – would lead to an increase in operating profit, claimed ABF.

Production in the UK was expected to be 1.19m tonnes this year, up from 2019, with recovery in sugar yield offsetting the reduction in crop area.

ABF’s interim results are scheduled to be posted this week.

Meanwhile, meat processor Tulip reported a loss of £73.9m for the year ended 30 September 2019,​ as the business started on its road to recovery for the full year 2020.

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