10th Sep 2007 07:01
Associated British Foods PLC10 September 2007 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 15 September 2007, which are scheduledto be announced on 6 November 2007. At the time of the announcement of the interim financial results in April, theChairman stated that progress was anticipated in adjusted earnings per shareover the full year, the first half having been level with the previous year.The increase in adjusted earnings will be in line with those expectations. The strength of sterling continues to affect operating profit adversely and theimpact on the translation of our overseas results will be some £19m for thefinancial year. Profit from our sugar businesses is strongly ahead of last year driven by thefirst year contribution from Illovo, which has exceeded our expectations, and asubstantial increase in profit from China. As in the first half, European sugarprofit was affected by the temporary quota cut and the cost of the restructuringlevy being in excess of reduced beet costs. Illovo has benefited from increasedcrops and strong local pricing offset, in part, by weaker world sugar prices. Arecord crop and firm prices have driven the increase in profit in China. In May the European Commission published draft regulations to strengthen theexisting restructuring scheme which was created to enable the reform of the EUsugar regime. If implemented, these proposals are expected to result in furtherquota renunciation with the aim of making good the shortfall in renounced quotawhich is likely to result from the current scheme. Agreement to the final formof the regulations is expected from the Council of Ministers by the end ofSeptember. The development potential of our sugar businesses has been reinforced with theannouncement of the agreement to form a joint venture with BP and DuPont tobuild a world scale bioethanol plant in the UK, and the investment in the beetsugar industry in Northern China with the creation of the Bo Tian joint venture. Sales and profit at Primark will be substantially ahead of last year. After theextensive number of store openings in the first half of the year we expect tohave opened a further nine new stores in the second half bringing the totalnumber at the year end to 170. Retail selling space increased over the secondhalf by 0.4m sq ft to 4.8m sq ft. Like-for-like sales growth in the second halfis expected to be 1% and our estimate of like-for-like sales growth, for thesame period, in stores unaffected by new openings is 7%. This was achieveddespite the impact, common to other clothing retailers, of poor weather over thesummer months. Trading in our two stores in Spain continues to exceedexpectation. Overall sales growth will be ahead of that achieved in the firsthalf although operating profit margin will be affected both by the predictedincrease in depreciation arising from the investment in stores and by a higherlevel of discounting. Grocery profits will be lower than last year primarily as a result of the lossesincurred by Allied Bakeries, charges for factory rationalisation in ACH and BlueDragon and adverse currency translation. The major relaunch of the Kingsmillbrand in February has increased volumes and market share. Combined with a priceincrease this has resulted in an improving performance for Allied Bakeries.However, a further bread price increase is now required to recover the recentsharp increases in the cost of flour. In North America the cost of vegetableoils has also increased sharply leading to some margin pressure at ACH.Twinings and Ovaltine continue to deliver strong growth with the benefit of themarketing investment in their strategic markets. Since the half year we havestarted the restructuring of G Costa with the intended relocation ofmanufacturing to Poland and work is underway to bring together the Patak's andBlue Dragon businesses. In Australia, milling and baking have performed welland there has been a good improvement in the meat business. Our Ingredients businesses are almost entirely located outside the UK. Profithas reduced primarily as a result of the adverse effect of currency translationand the impact of the strength of the Real on our Brazilian operations. In ABMauri yeast sales continued their growth in all markets with good growth inSouth America and SW Asia. The South American capacity expansions have beencompleted. In ABF Ingredients, yeast extracts, proteins and enzymesdemonstrated good growth and will benefit from the capacity added in the secondhalf. Expenditure on acquisitions in the year will be £138m which is primarily theacquisition of Patak's, which completed on 5 September. Proceeds from thedisposal of our Scandinavian food distributor and the commodity food polyolsbusiness in the US earlier in the year amounted to £60m. For further enquiries please contact: Associated British Foods John Bason, Finance Director Tel: 020 7399 6500 Citigate Dewe Rogerson Jonathan Clare, Chris Barrie, Hannah Seward Tel: 020 7638 9571 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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