AB Foods H1 profit down 2% |
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Wed, 19 Apr 2006 12:35
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LONDON: Food and retail group Associated British Foods Plc. has reported a 2 per cent fall in its first half earnings and warned of a further dip in its second half profits.
The company, which owns sugar refining business British Sugar, a bakery business, which makes the Kingsmill bread, and the Primark discount cloth stores, said adjusted pre-tax profit for the half year stood at 255 million pounds. It is broadly in line with market expectations of 249 million pounds to 259 million pounds.
Its revenue for the period rose 10 per cent to 2.88 billion pounds.
British Sugar, the largest single supplier to the U.K. market, has been affected by the decline in the sugar prices in European Union countries because of an incorrect consumption and stock forecasts by the European Commission. Higher energy costs too affected the division's operations.
The unit's profits will be further affected by the EU scrapping sugar subsidies from 2009 and opening up the markets to third world producers. AB Foods said it is in talks to buy a 51 per cent holding in Africa's largest sugar producer Illovo Sugar Ltd.
The sugar business accounts for 1/5th of the company's profits.
The company said operating profit in the rest of the year will continue to be adversely affected by conditions in the U.K. sugar business, its bakery operations and by energy costs. "As a consequence, some reduction in earnings after tax can be expected in the second half compared with the previous year," it said.
Its Primark division has shown rapid growths to assume over 30 per cent of the company's profits. The division's first-half like-for-like sales grew at 6 per cent, after last year's growth of 9 per cent, in spite of a fire destroying its main warehouse in November 2005.
The company's net investment income fell by 16 million pounds after it had spent more than 1.5 billion pounds last year on acquisitions as part of a strategy to reduce dependency on the sugar business.
The grocery division saw strong sales in Twinings teas, Ovaltine malt drinks and Ryvita crackers, helped it to improve profit by 1 per cent to 85 million pounds. This also offset the weaker profit in the bakery division.
The company is paying half-year dividend of 6.25 pence a share, up 4 per cent.
The company's shares, 55 per cent owned by the family of chief executive George Weston, closed at 843 pence Tuesday, valuing the company at over 6.6 billion pounds.
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Huge fire in warehouse destroys Primark's clothes 