ABF Report: Bakeries Minimize Loss, Ingredients Business Grows

Allied Bakeries made some progress due to reducing the operating loss through cost reduction programs and price increases, according to a trading update report from Associated British Foods.

Allied Bakeries operates across the UK, producing popular brands such as Burgen, Allinson, Sunblest, and Kingsmill. In addition to bread, their range includes rolls, pancakes, crumpets, muffins, hot cross buns, wraps and other bakery products. In 2017, a very competitive UK bread market and inflationary cost pressures led to lower revenue and margin at Allied Bakeries, according to the financial report.

Against a background of a continued increase in the market share of private label bread, investments in the Kingsmill and Allinsons brands have included new product launches for Super Seeds and premium craft loaves. Speedibake opened an expanded doughnut facility in the year and continued its focus on cost control. Wheat prices increased significantly over the summer as a consequence of a reduction in global production. The impact of this on costs will be reflected in ongoing discussions with customers.

Jordans cereal business, part of Allied Bakeries, has continued to drive international expansion, delivering strong revenue growth performance in Australia, New Zealand, Canada and Brazil. In a challenging UK crispbread market, with a large shift towards private label, Ryvita launched a range of protein-enhanced variants. A new production facility was opened at Bardney providing additional crispbread capacity and improved efficiency.

At AB World Foods, Patak’s continued to deliver market share growth following the launch of paste pots, endorsed by Jamie Oliver, while Blue Dragon extended international sales growth in Canada, Scandinavia, and Australia. Westmill Foods’ premium market-leading atta flour, Elephant, was successfully relaunched with a strong brand presence during Ramadan.

AB Sugar’s Revenue Down

AB Sugar’s revenue and adjusted operating profit will be well down on last year due primarily to significantly lower EU prices adversely affecting the UK and Spanish businesses. The profitability of successful African business, Illovo, will be maintained, according to the group.

The global supply of sugar has moved into surplus and the world market sugar price has reduced. The EU sugar regime ended in October 2017, removing sales quotas and constraints on exports. As a result of substantially higher EU sugar production in 2017/18, through increased crop area and beet yields, EU prices have fallen faster and more significantly than expected and are now more closely related to these lower world market prices. For the next financial year, the current level of EU sugar prices would represent a substantial reduction on those achieved this year.

Ingredients

Ingredients’ revenues will be ahead of last year and operating profit will again be well ahead with a further increase in margin.

AB Mauri delivered another year of growth in both yeast and bakery ingredients. North America benefited from a full year of ownership of the specialty blending business acquired in 2017, cost reductions in yeast manufacturing and sustained growth in bakery ingredients. Latin American businesses have grown despite ongoing economic difficulties and competitive pressures. The operation in Argentina opened its new bakery ingredients plant in Lanus in the year. Trading performance in EMEA continued to be strong and further investments were made in research and development. The group forecasts that ABF Ingredients will deliver strong progress again this year.