ABF's bakery profits rise despite higher wheat prices

By Eric Donald

Associated British Foods plc, the UK based food company, has reported higher pre-tax profits of Stg£223 million for the six months to the end of February 2004. That's up by 9% on the corresponding period of the previous financial year. Operating profits were up by 9% to Stg£204million while sales moved ahead by 5% to Stg£2.38billion.

ABF, who own British Sugar, reported higher profits and sales in its primary food and agriculture division. Sales were up to Stg£749 million while operating profits increased to Stg£85million. Operating margin in this division increased from 10.7% to 11.3%.

The sugar crop amounted to 1.37 million tonnes, some 60,000 tonnes lower than the previous year. Profits benefited from the strength of the euro against the pound in the early part of the year. British Sugar is hoping that Poland's accession to the European Union will provide a more stable price environment for its Polish subsidiary to operate in.

In the company's animal feed business, margins were impacted by higher wheat prices but benefited from sugar beet-based ruminant animal feeds. Profits in this business increased and volumes are running ahead of last year.

Higher wheat prices were also an issue for the company's bakery business, Allied Bakeries. But price increases for bread were secured and profits improved in this period. So its been a win-win situation for both farmer growers and the processers.