Associated British Foods remains “committed” to its under-pressure UK bread business Allied Bakeries after another year of losses from the unit.
John Bason, ABF’s finance director, told just-food today (5 November) the company would not consider selling part or all of Allied Bakeries, one of the UK’s largest bread businesses.
In 2014, UK peer Premier Foods sold a majority of its bread arm to US private-equity firm Gores Group. Asked if ABF would consider a similar move, Bason said: “No, we wouldn’t. We are committed. The Premier Foods thing was basically a disposal to Gores. The answer to that’s no.”
The 12 months to 14 September was the third consecutive year in which Allied Bakeries disclosed an operating loss. The unit, home to brands, including Kingsmill has been hit by low bread prices and competition.
In December 2018, Allied Bakeries’ largest private-label customer gave notice it would end its contract. ABF, announcing its annual financial results today, said the loss of that deal would lead to “a significant reduction in bread volumes from late in the 2019 calendar year, with limited opportunity to mitigate this volume loss in the short term”.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataSee Also:
The end of the contract also prompted ABF to book a non-cash impairment charge of GBP65m (US$83.7m) in its accounts.
In ABF’s last financial year, the company announced plans to close a bakery in the UK city of Cardiff. Bason, who said Allied Bakeries’ losses had fallen year-on-year, underlined further moves to lower Allied Bakeries’ costs are in the offing.
“We closed the Cardiff bakery during the year and we have a programme for – and I will hold off being specific because this will affect people’s jobs and so on – further cost reductions that will be implemented in Allied Bakeries in the coming year,” he said. “We’ve got the best invested bakery network in the UK. It’s how economically that’s best put to use and that’s what we’ll continue to look at.”
Overall, ABF’s grocery division – which also includes assets in the US and Australia – saw its revenue rise 3% to GBP3.52bn, with sales up across all units, including Allied Bakeries.
The division’s adjusted operating profit increased 13% to GBP380m, giving that part of the ABF group an adjusted operating profit margin of 10.8%, up from 9.8% a year earlier.
Operating profit for ABF’s grocery businesses in North America was “well ahead” of last year, the company said in its stock-exchange filing.
In September, ABF added to its US business with the acquisition of Anthony’s Goods, a fledgling US supplier of bakery products from almond flour to coconut oil.
Bason said: “Anthony’s Goods is I think interesting in a couple of areas. We’re already into bakery ingredients in the United States. If you are looking to move away from wheat-based flours, then you will be able to get almond flour, coconut flour. The other thing about Anthony’s is that it’s growing massively on Amazon. These guys are one of the stars on Amazon. It’s both route to consumer, as well as the actual food itself, that gives you the high growth.”
Pointing also to the “provenance” of the products of another business ABF has recently acquired – Italian balsamic vinegar supplier Acetum – Bason added: “That gives you a feel for the sorts of businesses we’re looking at and I think over the years there’ll be more to come.”
In 2017, ABF also acquired UK sports nutrition businesses H5 Ltd and Reflex Nutrition. just-food understands Lion Capital has appointed sell-side advisers to prepare for sale another UK sports-nutrition company, Grenade, in which the private-equity firm has a majority stake.
Asked if ABF was looking at the Grenade business, Bason said: “Let’s put it this way: I never comment on M&A and I won’t go there on this occasion.”
