‘Steady’ first half for sugar business at Associated British Foods

The British Sugar factory in Bury St Edmunds.

The British Sugar factory in Bury St Edmunds. - Credit: Su Anderson

British Sugar owner Associated British Foods (ABF) said today that “tightening” stock levels in Europe and China had resulted in firmer prices in the two markets.

In a pre-close statement ahead of its interim results, ABF said that, elsewhere, world sugar prices remained low and overall its sugar division had performed “steadily” in the first half.

“With most of British Sugar’s contracts for the current year already agreed, there will be no material impact on its profit from the improvement in pricing until next year,” it said.

“The UK beet crop has made good progress, but after last year’s record production of 1.45 million tonnes, a smaller area was contracted for cultivation this year.

“This reduction, combined with beet yields returning to more typical levels, is expected to result in production just short of 1.0 million tonnes this year.

“Operating performance remained very strong at all sites with campaigns now completed, and there remains a continued focus on the delivery of substantial cost reduction.”

ABF added that a state-of the-art anaerobic digestion plant for the production of biogas, currently being built at its Bury St Edmunds factory site, would be commissioned later this year.

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Elsewhere in group, ABF said its Kingsmill bread brand had gained market share, although bread prices remain at eight-year lows as grocers use staple foods such as bread to draw in customers as part of the supermarket price war.

It said: “Although average [bread] prices have been stable for the last six months, they remain at their lowest level for eight years.”

ABF’s star performer was again its Primark budget fashion chian where sales have recovered since weaker trading around Christmas.

Primark’s sales were up 7.5% over the the six months to February compared with a year ago, driven by new store openings.

It now expects like-for-like sales to be level with last year, with trading at the end of 2015 having been affected by unseasonably warm December weather.

ABF said it opened a net six new stores in the period, adding that operating margins at its two new shops in the United States were “better than expected”.

The group opened a pair of stores in Pennsylvania late last year, its first expansion into the US market. It said it plans to open a further six US stores later this calendar year, as well as its first Italian outlet in Milan in April.

The food, ingredients and retail group added that due to a weaker pound against the euro in recent weeks, it expects the currency impact on profits to ease to £10million from earlier forecasts of £25m. However, the group said its full-year expectations remain unchanged.

Analysts at Numis forecast AB Foods’ annual pre-tax profit will be little changed compared with a year ago at £1.03billion.