Interim financial figures from Associated British Foods show higher profitability for both its Agriculture and Sugar divisions.
AB Agri has reported an adjusted operating profit of £19 million on sales of £746m in the 24 weeks to February 27th 2021, up from £16m and £692m in the previous H1. Revenue growth came through increased feed volumes – especially in the company’s Chinese operations – and higher feed commodity prices.
There was a significant improvement in AB Agri’s China business performance, as the pig feed market recovered from last year’s African swine fever epidemic, with strong feed sales for other species too. The earlier phasing of sugar beet sales in China helped, as did good procurement and the non-recurrence of restructuring costs taken last year.
The AB Neo early animal life diet business increased sales, particularly in Spain, and profitability at the AB Vista feed additive company was up year-on-year through higher feed enzyme volumes.
Grain trading at Frontier Agriculture, the joint venture arable marketing business with Cargill, benefitted from increased commodity price volatility driven by factors including reduced UK wheat availability after the small 2020 harvest; the tightening global supply and demand balance; plus Brexit uncertainty before the end of December last year.
The AB Sugar division made an adjusted operating profit of £66m on revenues of £763m in the half, compared to £12m and £803m in the prior first half. Profit growth was mainly driven by its South African business.
In the UK, sugar production from the 2020/21 beet campaign is estimated at 0.9 million tonnes, below the previous year’s 1.19m tonnes due to wet weather conditions that delayed planting followed by the severe impact of virus yellows disease on the crop.
Looking ahead to the 2021/22 campaign, the company reports good progress in drilling the crop, with favourable March planting conditions, predicting a 1.0m tonnes of sugar production with a smaller crop area offset by a return to more average yields. The cold weather in February has “substantially reduced” the likelihood of virus yellows in summer 2021 – the conditions for an exceptional use of the neonicotinoid insecticides to control the aphid vector were not met. British Sugar says it continues work to secure long term neonicotinoid-free solutions in partnership with sugar beet growers and seed producers.
British Sugar plans to reopen its Vivergo wheat to bioethanol facility near Hull following the government’s increase in the mandated inclusion levels of renewable ethanol in petrol from E5 to E10. It says the supply of bioethanol to UK fuel blenders – and DDGS co-product to the feed sector – is expected from early 2022. Vivergo’s recommissioning costs will be charged to the second half.
The ABF group returned an operating profit of £320m on sales of £6.31bn in the first half, down from £349m and £7.65bn a year earlier, largely due to the effect of pandemic restrictions on the Primark retail business.
“Following the exceptional performance of our Grocery, Sugar, Agriculture and Ingredients businesses in the first half, we expect a softer performance in the second half,” warns ABF chairman Michael McLintock.
“Agriculture delivered growth in its high value markets. Full year profit at AB Sugar will be ahead of last year and in line with expectation. Full year profits at Ingredients and Agriculture are expected to be in line with last year with the impact of higher commodity costs affecting the second half.”