Food, ingredient and retail company Associated British Foods yesterday (4 July) announced proposals to close two UK sugar plants in York and Allscott and consolidate its remaining four UK factories.

The company also said that it intends to purchase 83,000 tonnes of additional sugar quota available in the UK as a result of the recent reform of the EU’s sugar regime.

The move follows last year’s consolidation of ABF’s Polish sugar production and the purchase of an additional 11,000 tonnes of sugar quota available in Poland. Together, the company said, these measures will reinforce its position as the lowest cost EU sugar producer.

A one-off charge of around GBP93m (US$171m) will be made in the results for the year to September 2006, GBP66m asset write-down and GBP27m of estimated cash costs associated with the reorganisation. The investment in additional quota in the UK and Poland is expected to cost GBP47m.

ABF chief executive George Weston said that this cost reduction and diversifying the company’s business interests are crucial to the company’s strategy to weather the changes to the EU sugar regime.

“We intend ultimately to produce more sugar from four UK factories than we currently produce from six. This development, together with the recently announced collaboration with BP and DuPont to build the UK’s first commercial biobutanol plant and the proposed acquisition of a controlling interest in Illovo Sugar Limited, the largest cane sugar producer in Africa, represent a significant investment in the future of the group’s sugar operations,” he commented.