ABFs cereal business contributes to margin improvement in grocery

ABF's cereal business contributes to margin improvement in grocery

Associated British Foods recorded higher annual sales and margins at its grocery business, with management suggesting further improvements are anticipated during the coming year.

ABF said revenue from its grocery operations, which include brands such as Kingsmill and Jordans, rose by 3% in the 53 weeks to 17 September, climbing to GBP3.27bn (US$4.06bn). The UK-based company said the extra week of trading benefited its revenues, which it said were "held back" by commodity deflation.

The group did note a "substantial" increase in Kingsmill volumes, as well as growth at its Silver Spoon retail sugar business. Three of the firm's brands - Jordans, Dorset Cereals and Ryvita - were integrated into a single unit, driving margin expansion. 

The company was also able to deliver a 30 basis point rise in margins, with EBIT on a 53-week basis rising by 7% to GBP304m.

On a group-wide basis, ABF said revenue was 5% higher and operating profit was 3% higher, rising to GBP13.4bn and GBP1.12bn respectively.  

Looking to the coming 12 months, ABF chairman Charles Sinclair said its grocery business is expected to make "further progress". Overall, the company, which also has assets including the Primark clothing chain, said it anticipates "progress in adjusted operating profit and adjusted earnings", Sinclair said.

"Assuming a continuation of current exchange rates, and following the significant devaluation of sterling, we expect group earnings to benefit from the translation of overseas profits. However, as Primark buys much of its merchandise in US dollars and sells in the UK in sterling, there will be an adverse effect, in the year, on its UK margins."