A pre-close period trading update from Associated British Foods (ABF), ahead of its full year results release in early November, predicts significant increases in revenues for its Agriculture (AB Agri) and AB Sugar divisions. The ABF 2022 financial year ended on September 17th.
The group anticipates higher AB Agri sales year-on-year, with higher selling prices in the period reflecting high commodity costs, although partially offset by some volume reductions. Revenues for the AB Vista feed additive business were broadly similar to the previous year, but margins were lower. The joint venture arable marketing operation Frontier Agriculture traded strongly over the twelve months, with good grain trading volumes and high demand for crop protection products.
Adjusted operating profit for AB Agri is expected to be ahead of last year’s £44 million generated from revenues of £1.54 billion.
AB Sugar is also expected to report “substantially” higher revenues, driven by higher sugar and co-product prices. The division reports that rising sugar prices and continued cost savings broadly offset the significant cost inflation over the year, particularly for energy.
UK sugar production from the 2021/22 beet campaign was 1.03 million tonnes (0.9m tonnes in 2020/21) with improved sugar yields as a result of good growing conditions. The four British Sugar factories performed well, with forward cover of gas costs mitigating much of the impact of remarkably high energy prices in the period. British Sugar also benefited from the improved margins for electricity it generated for export to the grid and from bioethanol derived from sugar beet.
Recommissioning of the Vivergo wheat to bioethanol plant on Humberside has progressed well, with its re-opening prompted by the governments move to 10% (E10) ethanol inclusion in road fuels. But Vivergo recommissioning costs and start-up losses amounted to some £30m.
European sugar prices were higher throughout the year and AB Sugar expects European sugar demand to remain in excess of production throughout the 2022/23 financial year.
The Group anticipates that Grocery division revenues will be up on the previous year, with the business in the division passing on price increases during the period. But a lag between input cost inflation and recovering the increase from the market may depress the division’s operating profit.
Within Grocery, Allied Bakeries sales were ahead of the previous year, but its losses increased through significantly higher costs for wheat, energy and distribution. Higher prices lifted revenues for AB World Foods and Jordans Dorset Ryvita, but margins declined. The Westmill brand benefited from the continued improvement in restaurant and take-away trade sales.
The Twinings tea sales reflected a return to more normal levels of demand after the COVID lockdowns of last year, supported by further new product launches in the wellness category. Ovaltine sales were also ahead.
“Group revenues for the year will be well ahead of last year,” reports the company. “In our food businesses, higher revenues reflect price actions and some volume increases, especially in Ingredients. In Primark, the much higher revenues reflect the ending of COVID-related restrictions and the resumption of more normal customer behaviour.
“Adjusted operating profit for the Group will be significantly ahead of last financial year, in line with our expectations.”