11th Sep 2006 07:00
Associated British Foods PLC11 September 2006 11 September 2006 Associated British Foods plc Pre Close Period Trading Update Associated British Foods plc issues the following update prior to entering itsclose period for its full year results to 16 September 2006, which are scheduledto be announced on 7 November 2006. At the time of the announcement of the interim financial results in April, theChairman stated that he expected some reduction in earnings after tax in thesecond half of our financial year. This would result from the impact of pricepressure in the first half in our EU sugar businesses, adverse tradingconditions in our bakery operations and higher energy costs. The reduction inearnings will be in line with our expectations. Primark has delivered very strong sales and profit growth in the second half.The programme for the refit and opening of the former Littlewoods stores is onschedule with the expectation of 18 stores trading at the financial year end.Including these stores, and our first store in Spain, 20 stores will have beenopened in the second half. They are trading well. Following the closure of 3smaller stores, the total number at the year end will be 143 trading from 3.5msq ft of retail selling space, an increase of 40% over the year. Like-for-likesales growth is expected to be over 3% for the full year with second halflike-for-like sales in line with the second half of last year when exceptionallystrong like-for-like growth of 12% was achieved. This measure excludes new andextended stores for their first year of trading and consequently only coverstrading in a little over half of the current selling space. 79 of the formerLittlewoods stores were not required and at the year end 69 of these have eitherbeen sold or are under offer and proceeds of £145m will have been received.Negotiations for the sale of the remainder are continuing. In British Sugar, the imbalances in supply and demand within the EU sugar marketand changes in producer behaviour in anticipation of the new regime in the firsthalf resulted in price pressure. However, the impact of these factors in thesecond half has been in line with our expectations. Next year, sugar supply inthe EU will be substantially lower as a consequence of a likely smaller crop andthe temporary quota cut already announced by the EU commission. The smaller cropin the UK is, however, still expected to meet quota, including the additionalquota purchased. Our estimate of the reduction in operating profit in the nextfinancial year as a result of the introduction of the restructuring levy, net ofthe benefit of the reduction in beet price, and the smaller crop remainsunchanged. Since the interims we have announced a number of initiatives which represent asignificant investment in the future of our sugar operations. The acquisitionof a 51% interest in Illovo Sugar Limited, the largest sugar producer in Africaand one of the world's leading low cost producers, completed on 4 September 2006for a cash consideration of £286m (R3.8bn). A full year's trading will beconsolidated into next year's income for the group. Well over half of our sugarproduction next year will be outside the EU. In July, we announced ourintention to purchase additional quota in the UK and Poland and the closure offactories in York and Allscott at the end of the 2006/7 campaign. Togetherthese will increase the efficiency of our EU operations. An exceptional chargeto cover the costs of the factory closures will be made in this financial year'sincome statement and will be excluded from the calculation of adjusted earnings. In June, a collaboration with BP and DuPont on UK biofuels was announced anddiscussions are continuing to develop detailed plans for production. In Grocery, Twinings, Ovaltine, Ryvita, Capullo in Mexico and Westmill allachieved strong profit growth. ACH performed well although Mazola volumescontinued to be down in a declining oils category. Profit at Silver Spoon wasaffected by pricing pressure on granulated sugar. In Australia, there areencouraging improvements in the operation of the new Sydney bakery. However,trading has been particularly difficult at Allied Bakeries with lower volumes ofboth Kingsmill and own label significantly reducing profitability. The newmanagement team is making progress in dealing with the issues in the businessand two new Kingsmill products were launched in the summer. We expect thesubstantial increase in wheat and energy costs to be recovered next year bybread price increases. The good progress reported by AB Mauri in the first half continued and highenergy costs were offset by strong sales growth in both yeast and bakeryingredients to deliver further profit improvement. As expected, interest payable, net of investment income, will be considerablyhigher than last year. However, the recent weakening of the US dollar, whichhas reduced the operating profit of US dollar earnings on translation, hasbenefited the interest payable on our US dollar borrowings. The spend onacquisitions in the year will be some £400m which is mainly Illovo. For further enquiries please contact: Associated British FoodsJohn Bason, Finance Director Tel: 020 7399 6500 Citigate Dewe RogersonJonathan Clare, Chris Barrie, Sara Batchelor Tel: 020 7638 9571 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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