Kingsmill owner ABF lost Co-op contract earlier in year

Kingsmill owner ABF lost Co-op contract earlier in year

Associated British Foods is to see annual sales from its grocery business increase but the UK group has posted a write-down related to its domestic bakery arm.

In a pre-close trading update ahead of the publication of ABF's full-year results in November, the Kingsmill bread and Patak's cooking sauces owner said it will see growth from its UK grocery business, its ACH unit in the US and its George Weston Foods subsidiary in Australia.

ABF's financial year runs to 12 September and the company said Covid-19 had boosted its grocery sales in the second half of the period thanks to "increased retail demand".

The company, which also operates in sectors including ingredients and clothing retail, said "adjusted operating profit" from its grocery division will be "significantly ahead" on the year before, pointing to "volume-driven margin gains" from ACH, George Weston Foods and its UK grocery arm. The company said those increases would "more than offset" a one-time, non-cash, write-down of assets within its UK bread unit Allied Bakeries of GBP15m (US$19.8m).

Sales from Allied Bakeries are set to have fallen following the end of the division's largest private-label bread contract. ABF said cost reductions and "a Covid-19 related uplift in sales" had led to "an improved underlying operating result" but the company has reviewed the carrying values of some of Allied Bakeries' distribution assets, resulting in the GBP15m charge.

Elsewhere, two other UK units, Westmill and AB Sports Nutrition, are set to have seen sales and profits fall due to the reduction in foodservice activity and sports events respectively. However, ABF said its Silver Spoon, Jordans, Dorset Cereals, Ryvita and AB World Foods units all benefited from "significant increases in consumer demand in the second half".

Balsamic vinegar business Acetum grew, benefiting from higher demand for balsamic vinegar in North America. The local business, ACH, "performed extremely strongly" driven by increased sales of home baking products.

In Australia, George Weston Foods "delivered excellent sales growth and margin improvement".