AB Foods Regulatory News (ABF)

7 Dec 2007 11:05

Associated British Foods PLC07 December 2007 CHAIRMAN'S ADDRESS TO AGM - 7th DECEMBER 2007 Good morning Ladies and Gentlemen. I am delighted as your Chairman to welcomeyou to the seventy second Annual General Meeting of our company, AssociatedBritish Foods. It is good to see so many of you here. It is just past the appointed hour of 11.00 o'clock so apart from a reminder, asa courtesy to others, to switch off mobile phones we'll get started. I am joined on the platform by my colleagues on your Board and by our companysecretary, Paul Lister. Regular attendees amongst you may have spotted a newface this year and I would like to take a moment to introduce Peter Smith toyou. A brief CV is on page 29 of the Annual Report. Peter could you pleasestand so that shareholders can identify you. Peter brings very wide experienceboth from his distinguished earlier career in the public accounting professionand latterly as a director of a variety of businesses. He is extremely wellqualified to chair ABF's Audit Committee and is also contributing strongly toBoard discussions. To our formal business then. There is a quorum present and I therefore formallyopen the meeting. You may find it helpful to follow the proceedings byreferring to the Notice of the Meeting which this year is on separate sheets youwill have received with the Annual Report and Accounts. In view of the length of the Notice of the Meeting I will, with your permission,take it as read. The formal part of our meeting today consists of 10 resolutions which I will putto the meeting, after each of which I will invite your questions. Before we getto that however I would like to make a few remarks. The Annual Report and Accounts, which you received some weeks ago, includes fullcomment on the past year's trading. I will only mention a few important issues.When I spoke to you a year ago I said that the previous year had been one ofsignificant change and one which laid the foundations for strong, sustainablegrowth in the year ahead. The first evidence of this is apparent from theresult for the past year. Turnover grew by 13% and operating profits by 11%,while profits net of interest and tax rose by 10%. Earnings per ABF share grewless sharply, by 4%, reflecting the Illovo minorities' share in their profits.The proportion of profits earned by our UK based operations now accounts forsomewhat less than half of the total compared to almost three quarters at theturn of the century. The remainder is spread widely across the Americas, AsiaPacific and Europe, Middle East and Africa. We are well placed to develop ourbusinesses in all these regions. Results for the past year have continued to be affected by sugar regime reformin Europe. Profits from this part of our business were some £30m lower than inthe previous year. This, together with adverse impacts of currency changes onoverseas profits and losses in our UK bakery business, has masked to some extentthe progress made by most of our businesses. I would like to take a few moments to talk about our sugar businesses. Twothirds of our production is outside Europe and that part has good growthprospects based as it is in countries with rising rates of consumption. Sincethe acquisition of our 51% stake, Illovo has announced several major investmentsto expand existing capacity. Most recent was the decision to invest in thesugar industry in Mali with a capacity for 200,000 tonnes together with anethanol plant and electricity co-generation unit. The project, which has beendeveloped in close co-operation with the government of Mali, will also enablemajor agricultural expansion providing jobs and income in the surrounding area. A few months ago British Sugar announced a major investment in the provinces ofNorth Eastern China. This is an excellent opportunity to work with growers toimprove radically their agricultural yields. In addition, our processing skillswill enable much improved production efficiency. Again, this project has beendeveloped in close co-operation with local government. It also will result in amajor contribution to the local economy. Within Europe and particularly in the UK we have continued to invest in improvedefficiency. The transitional effects of the changes in the EU sugar regimecontinue in the current year. However, we are confident that there is a soundfuture for this business when the changes described in the Annual Report arefully implemented. Meanwhile you will have noted our initial investment inbioethanol, which is now fully operational, and the much larger joint venturewith BP and Dupont which is currently in the design phase. I hope you will see from these comments that our sugar businesses have someexcellent opportunities. This short video should give you an idea of the rangeand scope of our sugar interests. Thank you ladies and gentlemen. That shows you much better than my words therange of our sugar activities around the world. However, we have not been idlein other areas of the group. In our food activities we have strengthened ouryeast business by expanding capacity and by acquisition. The addition of thePatak's brand and assets to our UK grocery businesses was very important.Linking its excellent reputation in Indian cuisine with our existing Blue Dragonbrand to form our 'World Foods' business gives a strong position in this growingmarket. We have also continued to invest in maintaining and enhancing thequality of our plants worldwide. In talking about the growth of our businesses I will finish with a few wordsabout Primark. You will remember that a step change in Primark's scale began alittle over two years ago with the purchase of the Littlewoods chain. Withother new sites, the programme of refitting and opening stores was a majorchallenge. It has been completed on time and on budget. Primark in the UK nowtrades from almost double the space of two years ago. Some of the openings wereso successful that they received national media coverage. As a consequence,Primark is now reckoned to be the second largest clothing retailer in the UK byvolume and the largest by turnover in the important 'value' sector. Primark isa major force across the UK. I am glad to say that there is still scope toexpand our coverage. While so much attention has been on the UK expansion, I am delighted that growthelsewhere has been strong. In Eire, results for Penneys have been outstandingand a considerable programme of increasing space is in train. Last month twonew Primark stores opened in Spain. Their early results, together with those ofthe two stores opened in 2006, are very encouraging. Further stores arescheduled to open in Spain in the next couple of years, by which time Primarkwill have a sizeable presence in this important market. Listening to me talk about the major investment of recent years, shareholdersare entitled to ask whether we can continue to make the necessary level ofinvestment to support and grow our businesses. The answer is a confident 'Yes'.The group is lightly borrowed for one of its size; cash flow is strong. Thereis ample capacity to continue to back our businesses with substantial investmentwhere appropriate; and, very importantly, well within the bounds of prudentfinancing. The annual report shows that 85,000 people now work in the ABF group. I amconscious that work has a major influence on every employee's life. As anemployer, the group frequently contributes beyond the contents of the paypacket. In many parts of Southern Africa and China for example, the business isthe focal point for the community and also provides services such as health,education and housing. Across our businesses much effort goes into training anddevelopment. I am also aware of the demands our diverse group places on many employees interms of travel and exposure to different cultures and working practices. Thesuccess with which people rise to these challenges is always impressive. I amgrateful to all our employees for the contribution they have made to the group'sdevelopment. Now let me comment on current year trading. The continued development of thegroup's businesses and the investments we have made will result in furtherprogress in 2008. I said in my statement in the annual report that reform ofthe European Union sugar regime will again have a large negative effect onprofit in the coming year. Although there is a greater degree of uncertaintythan normal about general economic conditions, including volatility in somecommodity prices and currencies, we expect that profits in the rest of the groupwill show good progress. Trading so far in the current year has been fully upto our expectations. Beyond the current year we expect the revised shape of the EU sugar regime tobring stability to the European market and the prospect of some profit recovery.The major capital investment of recent years will support the prospects forlonger term growth in all our businesses. For further information please contact: Associated British Foods plc John Bason, Finance Director Tel: +44 (0)20 7399 6500 Geoff Lancaster, Head of External Affairs Tel: +44 (0)7860 562 659 Citigate Dewe Rogerson Jonathan Clare, Chris Barrie, Hannah Seward Tel: +44 (0)20 7638 9571 This information is provided by RNS The company news service from the London Stock Exchange