The UK bread market registers lower profit
The UK bread market has continued to be very challenging and lower bread prices resulted in a reduction in profitability, shows a report from Associated British Foods.
Sales volumes at Allied Bakeries increased over the financial year and the Kingsmill brand was relaunched in May and revenues from Sandwich Thins have continued to build following last year’s launch. Associated British Foods (ABF) has completed a major capital investment program and this year has reduced waste, further improved production processes and manufactured products of a consistently high quality.
Silver Spoon’s cost reduction program has improved operational efficiency. Commercial success this year included the securing of two supply contracts with major UK retailers, according to the press release from ABF. Since its acquisition last October, Dorset Cereals has traded ahead of business plan and its integration with Jordans Ryvita has gone smoothly. Jordans continued to perform well, but Ryvita crispbread sales were lower in a competitive market.
At AB World Foods, Patak’s and Blue Dragon maintained their positions as the leading Indian and Oriental ambient brands in the UK but lost some non-core business leading to lower revenues. An improved sales mix drove an overall margin increase and operating profit will be ahead of last year. The UK ethnic restaurant and take away market has seen some improvement after several years’ of decline, with increased consumer expenditure on out of home eating. Westmill achieved margin improvement with its Chinese catering brands performing particularly well driven by strong commercial activity.
Revenue at George Weston Foods in Australia will be close to last year in local currency but profit will be ahead. Bread margins were lower as retailers featured bread in their drive for lower prices with heavy price promotion activity which more than offset the benefits of a cost reduction program across all bakery sites. Margins in the Don KRC meat business improved markedly in the second half with higher volumes and much improved production efficiency. As expected raw material cost and quality were substantially better in the second half.
Revenue and adjusted operating profit for AB Sugar for the full year, at both actual and constant currency, will again be substantially lower than the previous year driven by the further decline in European sugar prices. Further benefits delivered by ongoing performance improvement program, including significant reductions in overheads, made an important contribution to reducing ongoing cost base. These could not compensate for the impact of lower prices.
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