Full year results from Associated British Foods show that the Agriculture division, AB Agri, maintained profitability and revenues at last year’s level, despite the effect of Covid-19 restrictions on demand for animal feeds during the period.
The division made an operating profit of £43 million on revenues of £1.40 billion in the year to September 12th 2020, compared to £42m and £1.39bn in the previous year.
Feed sales were lower across the UK volume feed businesses trading as ABN, KW, and Trident. The company notes lower sales prices in line with reduced commodity costs over most of the period. At the same time, new customer business only partially offset a fall in compound feed demand as milk and livestock customers reacted to the sudden decline in milk and poultry meat volumes from food service and catering in the spring and early summer COVID-19 lockdown.
Of the specialty feed businesses, sales and profit at the international feed enzymes business AB Vista were “strongly ahead” of the prior year, lifted by good sales growth in the Americas and the first full year’s contribution from the Signis animal digestion aid. But AB Vista’s growth slowed in the second half as customers either reduced feed production volumes, or their feed enzyme inclusion rates, as foodservice demand slowed in lockdown.
The new Premier Nutrition pre-mix feed facility at Fradley Park in Staffordshire is now fully commissioned. AB Agri’s feed businesses in Spain and Denmark had a “particularly strong” year, while the 2019 Polish starter feed business acquisition, now operating as Primary Diets Polska,
The division’s Chinese feed business saw higher profitability in line with lower feed material prices and tight cost control. The growth of the company’s beef and sheep feed volumes in China is reducing its reliance on pig production, which is continuing to suffer from last year’s outbreak of African Swine Fever which significantly reduced pig numbers.
“Revenue and adjusted operating profit at AB Agri were in line with last year,” says a spokesman. “As COVID-19 appeared in our markets, the business reacted swiftly and effectively to ensure the safety of employees and continued availability of animal feed to our customers.”
The year saw AB Agri create Intellync through the merger of its AB Sustain operation, two small farm data and technology businesses in Denmark and Northern Ireland it recently acquired, plus other complementary assets in the division. The combined new data and technology business aims to provide insight and decision support for livestock producers, leading to enhanced efficiency, animal welfare and supply chain assurance. The venture has a new Agricultural Technology Centre in Kilkenny, Ireland.
Profitability at Frontier Agriculture, the joint venture grain trading and crop inputs business with Cargill, was reduced. The wet autumn 2019 followed by a dry spring severely cut the winter cereal crop area and yield potential, with a consequent fall in demand for fertiliser and crop protection treatments.
The ABF Sugar division, AB Sugar, saw operating profit rise 285% to £100m on sales 1% lower at £1.59bn (£26m and £1.61bn in 2019).
The expected recovery in EU sugar prices during the year more than offset lower profits at the South African sugar operation Illovo.
EU sugar prices increased in line with lower stocks following two seasons of smaller EU sugar production. The division estimates that the 2020/21 EU campaign will again be below average as adverse weather and virus yellows disease have affected beet and sugar yields – sugar output is likely to be below consumption demand.
The UK produced 1.19 million tonnes of sugar from the 2019/20 beet campaign, ahead of the prior year. However, British Sugar expects the 2020/21 beet harvest and processing season, which is now underway, to be at least 10% down year-on-year.
The ABF Group has posted an operating profit of £1.02bn on revenues of £12.94bn, respective decreases of 31% and 12% on the previous year. The company notes a strong 26% adjusted operating profit increase across its collective food chain divisions – Agriculture, Grocery, Ingredients and Sugar. But the Primark clothing business was adversely affected by the pandemic’s retail closures, with a 63% fall in operating profit to £362m.