Is Associated British Foods offsetting rising costs?

By Rod Addy

- Last updated on GMT

Trading in the new financial year for grocery, sugar, ingredients and agriculture had exceeded expectations
Trading in the new financial year for grocery, sugar, ingredients and agriculture had exceeded expectations

Related tags Finance Supply chain

Associated British Foods (ABF) is managing to offset what it describes as 'an escalation' in utility, supply and raw material costs through cost efficiencies and price recovery.

In a brief AGM statement, ABF said the strategy was enabling it to address rocketing price inflation in current volatile global markets.

"Given the understandable concerns around the market about the scope for current external matters, particularly around the ongoing pandemic, to negatively influence ABF's trading performance, we welcome the content of this update,"​ Shore Capital director and head of research Clive Black said.

Black described ABF's statement as 'encouraging' and 'reassuring'.

'In line with expectations'

In the update, which followed ABF's report on its full-year results on 9 November, ABF chairman, Michael McLintock stated: "Trading to date in our new financial year across grocery, sugar, ingredients and agriculture has been in line with expectations.

"We are experiencing the impact of widely-reported port congestion and road freight limitations and our businesses have been working hard to overcome these difficulties.

"We have seen an escalation in the cost of energy, logistics and commodities and we have been implementing plans to offset these through operational cost savings and, where necessary, the implementation of price increases."

Reassuringly, ABF reported that trading was 'ahead of expectations' in its Primark clothing retail business.

'Expect significant progress'

"Taking these factors into account, we continue to expect significant progress, at both the half and full year, in adjusted operating profit and adjusted earnings per share for the group,"​ McLintock concluded.

In its annual results for the 53 weeks to 18 September, ABF reported group revenue up 1% according to constant currency rates to £13.9bn. Adjusted operating profit rose by 2% to just over £1bn. That had been helped by a strong performance in sugar, where adjusted operating profit rose by 75%, and brand investment and strong international trading in grocery.

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