Associated British Foods said this morning (23 February) that it expects a decline in its grocery division this year as a result of consumer downtrading, despite a good performance at the company’s Allied Bakeries business.
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In the company’s trading update, prior to its interim results to be announced on 21 April, ABF said it expects a “slightly lower” adjusted operating profit for the six months ending 28 February.
Despite this ABF said its results will show “good growth” in sugar and ingredients with “a better than forecast” result in agriculture.
In the sugar business in particular, ABF sid profitability in China will be “significantly” reduced by much weaker sugar prices, while a substantially lower profit at ACH and declines in Silver Spoon and George Weston Foods in Australia hit grocery profits.
“Allied Bakeries has continued to trade well with higher branded volumes and an improvement in profit,” the company said in a statement. “In Australia, bakery margins have been impacted by consumers switching from premium branded to own-label products and the integration of the KR Castlemaine meat business is progressing to plan.”
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By GlobalDataPrimark, the company’s fashion retail unit, is again expected to deliver “excellent results”, ABF said.
ABF also revealed that it is finalising a US$600m private placement with UK and US institutional lenders. The new credit line will diversify the company’s debt base – which currently relies on bank loans – providing greater flexibility.
