abf6 Nov 2012 20:52
Negative Points:
For the group's Sugar business, management expects a reduction in profit, a result of lower EU production. Over the year gone, profit in China was lower as a result of weaker sugar prices.
Accompanying management comments noted that "global economic uncertainty looks set to remain a feature of the new financial year and in recent months we have seen an increase in some of our commodity costs, notably cereals."
Although Grocery revenue increased by 1%, adjusted operating profit declined by 23%, reflecting primarily the cost of restructuring at George Weston Foods in Australia and Allied Bakeries in the UK, together with the difficult retail and competitor environment in Australia.
At its Ingredients business, revenues were level with last year, while operating profit was sharply lower reflecting restructuring charges and continuing operational challenges faced by AB Mauri. The European yeast market continued to be extremely competitive and margins remained constrained by an inability to recover fully raw material cost increases. In Asia, sales volumes in China were disappointing and key raw material costs, primarily molasses, remained at a high level.
Management previously warned that the ending of sugar quotas in 2015, as proposed by the European Commission, would jeopardise further investment in the European sugar industry. The company said it was working with policymakers in the EU to explore alternative options for sugar reform.
Volatility in commodity prices remains in the background. The group is exposed to foreign exchange risk.
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