Associated British Foods Takes Steps to Reduce Loss in the Bakery Business

Associated British Foods announces that they are committed to reducing the operating losses at Allied Bakeries this coming year, with a program of cost reductions. These follow the closure of the Cardiff bakery at the end of the financial year, the group explains in their 2019 Annual Results Announcement.

The group announced a total revenue of GBP15.8bn and a growth of 2%, while the grocery revenues were of GBP3,521m, 2% ahead of last year when they recorded GBP3,420m.

At Allied Bakeries, revenues progressed this year following price increases agreed with a number of customers, according to the group. As previously advised, the termination of the largest private label bread contract will lead to a volume loss in the next financial year. As a consequence, the carrying value of the assets in this business was no longer supported by our forecasts of its discounted future cash flows and a non-cash impairment charge of GBP65m has been recognized as an exceptional item in the income statement. “We have taken steps to reduce our capacity and closed our Cardiff bakery at the end of the year. During the coming year we will implement cost reductions in a number of operational areas to further reduce the losses in this business,” according to the annual results announcement.

On the other hand, Jordans, Dorset Cereals and Ryvita delivered an improved manufacturing capability, with the commissioning of the new Ryvita bakery in Bardney, Lincolnshire, and the transfer of muesli production to a state-of-the-art facility in Poole, Dorset. Margin declined due to higher raw materials costs. Silver Spoon expanded distribution in the UK, winning a sugar contract with a major retailer.

George Weston Foods in Australia delivered excellent margins and operating profit growth. Tip Top achieved strong sales in packaged bread and realized improved margins driven by operational efficiencies.

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