Associated British Foods (ABF) has booked a £41m ($50.4m) impairment charge in Australia related to its Don meats brand.
Elevated meat costs in Australia, labour shortages and an insolvency at an unnamed “major” distributor resulted in ABF taking the non-cash impairment charge following a so-called value-in-use assessment.
The disclosure was made in London-listed ABF’s annual results today (7 November), which showed overall sales from the company’s grocery division rose 12% to £4.2bn.
Across the ABF group, which also owns the Primark retail stores, pricing to mitigate input-cost inflation helped to support sales revenue, including within the grocery division.
“Our grocery businesses performed with great resilience in what were challenging inflationary conditions,” ABF said. “Revenues were strongly ahead of last year driven primarily by price increases through the course of the year.
“Despite the challenges of dealing with inflation volatility, adjusted operating profit margin held at 10.7%, helped in part by a recovery in our Allied Bakeries business.”
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While the margin was flat, adjusted operating profit in grocery rose 12% to £448m, while unadjusted it was up 9% at £402m.
As with the UK-based Allied Bakeries business, pricing all supported bakery sales revenue in Australia, where ABF said it invested in the “reconstruction” of its Tip Top brand’s plant in Canning Vale in Perth.
ABF also struck a deal in the UK post the 16 September year-end, snapping up Capsicana for an undisclosed sum.
Founded by Ben Jackson in 2009, Hitchin, Hertfordshire-based Capsicana supplies Latin America-inspired meal kits, cooking pastes and seasonings, along with tortilla chips and wraps. Its customers include Tesco, Sainsbury’s and Waitrose.
In the US, ABF said it had “strong” sales in its grocery lines, a country where the business claims Mazola is the “leading” cooking oil brand and where the company invested in increasing capacity during the year.
ABF is a diversified FMCG business, with divisions spread across retail – Primark – grocery, ingredients, agriculture and sugar. Retail is the largest division following by food in terms of revenue, which for the group as a whole rose 16% to £19.8bn, with profit before tax up 25% at £1.3bn.
CEO George Weston said: “At the outset of this financial year the group was facing very significant economic challenges caused in part by major geo-political events.
“Profitability in our food businesses moved ahead as a result of the appeal of our products and the strength of our brands, both of which supported us in the recovery of high levels of input-cost inflation without disrupting our customer relationships.”
For the year ahead, ABF said “inflationary pressures have eased and there is less volatility than there was 12 months ago”.