ABF said Kingsmill had gained share in UK bread sector

ABF said Kingsmill had gained share in UK bread sector

Associated British Foods chief executive George Weston today (20 April) praised the contribution that the UK group's grocery business had had on company profits in the last six months.

Weston said earnings from ABF's grocery portfolio, which includes Kingsmill bread, Jordans cereals and Indian cuisine brand Patak's, had outshone the group's other interests, including its sugar operations and discount retailer Primark.

"For all the rebound in sugar and the continued fireworks from Primark, the grocery business has been the source of the greatest profit improvement last year," Weston told analysts after ABF reported its half-year figures.

Operating profit from the company's grocery business leapt 53% even as sales rose 4%. ABF said restructuring had boosted earnings from its grocery portfolio. Looking at ABF as a whole, adjusted operating profit was up 25% at GBP370m, while turnover climbed 10% to GBP4.8bn.

Sanford Bernstein analyst Andrew Wood said ABF's grocery business had "delivered very strong margin growth" but pointed to a slowing in sales from the division.

"Growth in grocery continues to slow. Despite some forex benefits, growth was only 4% in H1. However, grocery delivered very strong margin growth in H1, with margin up 190 basis points for the semester, the second consecutive semester of positive margin growth, perhaps suggesting that the perennially disappointing, low margins might be set for a long-awaited recovery," Bernstein said.

Finance director John Bason said ABF expected earnings from its grocery business to improve again in the second half of the year, if not at the same level of growth in the six months to the end of February.
"We should see some big improvements from grocery for the remainder of the year," Bason told analysts. "You probably need to raise your forecasts for grocery."