Associated British Foods (ABF), owner of bakery brands such as Abbott’s Bakery and Allied Bakeries, has said in their latest trading update that they continue to encounter “significant cost pressures”, but that consumer spending has proved more resilient than previously anticipated.
Their food businesses in particular are looking to recover inflation through cost mitigation and price increases, and for this half of the year, expect sales and operating profit to be higher compared with last year’s figure.
Some of their main brands – grocery, food, sugar and ingredients – are expected to either only be “modestly” higher than figures last year or significantly higher. Increased costs associated with lower yields of UK beet crop will reduce the company’s overall profit.
For their food businesses, revenue is expected to be 10% higher than last year, ABF has said, but price increases continue to build and remain an obstacle. One challenge was related to high bread wheat prices in Australia, due to wet harvest and consequential lower yield. Their edible oils and bakery ingredients business in the US, ACH, has reflected a good trading performance and pricing actions in order to cover inflationary costs.
The company is also facing challenges to their sugar business, as lower production and yields are driving up prices. Estimates for EU sugar production in 2022/2023 are anticipated to be 10% lower than last year, caused by adverse weather and a smaller growing area. European and world sugar prices remain high, impacting in particular the company’s UK and Spanish businesses.
UK sugar production in particular has been hit, down to 0.74 million tonnes from 1.03 million tonnes last year. The fall in production reflects lower beet sugar yields, as ABF’s British Sugar has moved quickly to secure alternative sources of supply, working with customers to ensure continuity of supply. Energy cost inflation has also figured, in spite of government support offered. As a result, their sugar business British Sugar will record a lower profitability.
ABF’s bioethanol plant in Hull has been operating to specification but will record a loss, the company said, due to higher energy and wheat costs combined with lower bioethanol prices.
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