AB Foods Regulatory News (ABF)

26 Feb 2007 07:01

Associated British Foods PLC26 February 2007 26 February 2007 Associated British Foods plc Pre Close Period Trading Update Associated British Foods plc issues the following update prior to entering theclose period for its interim results to 3 March 2007, which are scheduled to beannounced on 24 April 2007. The Chairman stated at the Annual General Meeting on 8 December 2006 thatadjusted operating profit in the current year was in line with our expectationsdespite volatility in some commodity prices and fluctuations in currencies.Progress was anticipated in adjusted earnings per share over the full year. Theincrease in adjusted operating profit would be more weighted towards the secondhalf. This continues to be the case. Good progress was made in operating profit, particularly in our sugar businessesand in Primark. The strength of sterling adversely affected the half year bysome £9m on the translation of our overseas results but this was partlymitigated by the benefit of falling energy costs. The investments in Primarkstores and Illovo have increased the group's net financing costs which, togetherwith the substantially increased minority interest arising from Illovo, willimpact adjusted earnings per share as previously guided. Profits from our sugar businesses were strongly ahead of last year with thestrength of our overseas businesses more than offsetting the lower profit in theUK. The UK crop of 1.15 million tonnes will be sufficient to meet therequirements of our sugar quota and biofuel production. UK sugar prices havestabilised but profit was lower as a result of the temporary quota cut and thecost of the restructuring levy being in excess of reduced beet costs. Thesewere mitigated in part by the additional quota acquired, a very efficientcampaign and lower energy costs. Profit was higher in China, resulting from avery large crop, and in Poland with an excellent campaign at the expandedGlinojeck factory. Illovo made a strong contribution benefiting year-on-yearfrom improved domestic sales and prices, operating cost reductions and a higherworld sugar price. The European Commission has demonstrated its desire to manage the supply ofsugar in the EU in 2007/8 with its announcement of an advanced quota withdrawalof 2.4 million tonnes. Moreover the Commission is working to find a bettersolution to the imbalance between supply and demand which will result from thelikely shortfall of quota renunciation. Grocery profits were lower than last year, primarily as a result of a poorperformance by Allied Bakeries. The competitive bread market in the UK delayedthe recovery of increased wheat prices last autumn and volumes were lower thanexpected. We have just implemented a major relaunch of the Kingsmill brand withimproved products and new packaging. There will be strong marketing supportwhich will continue into the second half and we have increased bread prices.ACH performed well and benefited from a continued strong contribution fromCapullo in Mexico. Twinings and Ovaltine continued to deliver good salesgrowth, particularly tea in the UK. Although volumes at Silver Spoon were aheadof expectations they were insufficient to offset the impact on profit frompricing pressure. Milling and baking in Australia achieved price increases torecover higher wheat costs and major improvements have been made in theoperation of the new Sydney bakery. Ingredients showed good progress. Yeast sales in all of AB Mauri's marketsincreased and there has been an encouraging improvement in profit in NorthAmerica. Price increases have been implemented in many markets to recoverhigher molasses and energy costs. Further capacity increases are beingcommissioned in the growth markets of South America and Asia. Yeast extractsand Proteins generated good growth but Enzyme profits were affected by higherraw material costs. We completed the sale of our commodity food polyolsbusiness in the US this month and there will be a phased closure of themanufacturing plant in Delaware. We will recognise a loss on the disposal ofthis business at the half year. Sales and profit at Primark were substantially ahead of last year. Theextensive store opening programme planned for the first half has beensuccessfully implemented. 23 new stores have opened and 5 smaller stores closedto give 161 stores with 4.4 million sq ft of retail selling space. We will opena further 8 stores in the second half taking the total retail selling space to4.7 million sq ft by the financial year end. Primark has continued to tradewell. Like-for-like sales were level with last year in the first half despitethe previously highlighted impact on existing stores of adding 1.5 million sq ftof new space. Our estimate for like-for-like sales growth in stores unaffectedby new openings is 4%. Trading in the new stores has been encouraging. During the half year we disposed of our Scandinavian food distributor as well asthe commodity food polyols business in the US. Proceeds were £60m. For further enquiries please contact: Associated British Foods John Bason, Finance Director Tel: 020 7399 6500 Citigate Dewe Rogerson Jonathan Clare, Chris Barrie, Fiona Bradshaw Tel: 020 7638 9571 This information is provided by RNS The company news service from the London Stock Exchange