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April 24, 2007

UK: AB Foods shrugs off grocery weakness

Associated British Foods today (24 April) posted a healthy rise in first-half profits as the company shrugged off a “disappointing” grocery performance.

Associated British Foods today (24 April) posted a healthy rise in first-half profits as the company shrugged off a “disappointing” grocery performance.

AB Foods, which owns grocery brands including Kingsmill bread and Twinings tea, reported a 7% rise in adjusted operating profit to GBP272m (US$543m) for the six months to 3 March.

The result was in part thanks to a first-time contribution from the company’s African sugar business and came after the company stripped out losses on the sale of food assets in Scandinavia and the US. Revenue jumped 12% to GBP3.2bn, AB Foods said.

While the expansion of AB Foods’ discount clothing retail chain Primark also drove the rise in earnings, the company’s grocery business suffered.

Operating profit from the grocery division tumbled almost 24% with AB Foods citing a “poor performance” from its Allied Bakeries business. Competition in the UK bread market hit volumes but AB Foods said it hopes the relaunch of Kingsmill will boost sales.

A weak dollar also hit AB Foods’ US grocery business while the company endured lower sugar prices at its Silver Spoon unit.

Nevertheless, chief executive George Weston remained upbeat. “This is a good set of results. The satisfactory growth in revenue and operating profit in the first half reflects the substantial investment made by the group in capital and acquisitions last year.”

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