TIDMABF
RNS Number : 5131Y
Associated British Foods PLC
25 February 2013
25 February 2013
Associated British Foods plc
Pre Close Period Trading Update
Associated British Foods plc issues the following update prior
to entering the close period for its interim results to 2 March
2013 which are scheduled to be announced on 23 April 2013.
The interim results for the group will be ahead of our
expectations at the start of the year. Adjusted operating profit
will be higher than last year driven by an outstanding performance
from Primark. Net financing costs in the first half will benefit
from a strong cash flow and lower net debt during the period.
Earnings per share for the first half will be substantially ahead
of last year. Our expectation for the full year is unchanged and
earnings growth for the full year will therefore be heavily
weighted towards the first half.
Cash flow and funding
Operating cash flow for the half year is expected to be stronger
than last year with higher profits, lower capital expenditure, and
a lower working capital outflow than is traditionally the case in
the first half benefiting from the higher sales and good stock
management at Primark. As previously indicated, capital expenditure
in the food businesses for the full year is expected to be lower
than last year although investment in new store development for
Primark is likely to be similar. Net debt at the half year is
expected to be more than GBP0.3bn lower than a year ago at some
GBP1.25bn.
Sugar
Profit from Sugar in the first half will be lower than last year
with an improvement at Illovo more than offset by a decline in
China and a non-cash charge for the mothballing of our two smallest
beet sugar factories in north China.
UK revenues were ahead of last year with higher sales volumes
compared with last year's abnormally low level at the beginning of
the financial year, and marginally higher sugar prices. Poor
growing conditions during 2012 resulted in a lower beet yield and
sugar content. As a consequence, the UK campaign started later and
factory throughput has been lower to allow for a slower filtration
process. Sugar production for the current year is now estimated to
be 1.15 million tonnes compared with last year's 1.32 million
tonnes. Profit for the full year is expected to be lower as a
consequence of the lower production, a higher beet cost and a
weaker euro in the first half. Production has now started at the
Vivergo bioethanol plant in Hull.
In Spain, delayed planting in the south is expected to reduce
the size of the southern crop and heavy rains will extend the
campaign in the north into March. We nevertheless expect to achieve
overall quota sugar production volume in the current financial
year. Profit will be lower due to a higher beet cost and this
year's sales including a higher proportion of lower-margin, refined
cane sugar.
Revenues at Illovo benefited from higher production volumes with
increased cane yields and sugar content, particularly in South
Africa. Campaigns were extended in Zambia and Swaziland where the
recently expanded plants operated well. As a result we expect
profit at the half year to be ahead of last year.
Sales volumes in China were unusually low last year and, as a
result, this year's revenues will be ahead despite deteriorating
prices. A larger cane crop is expected to increase southern sugar
production volumes ahead of last year. Sugar production in the
north is expected to be in line with that achieved last year, with
the new Zhangbei factory fully commissioned in time for the new
season. As a result of much lower sugar prices our operations in
China will be loss-making this year. It is anticipated that sugar
prices will continue at this level for some time and we have sought
to reduce our cost base. At the end of this campaign the small beet
factories at Wangkui and Baolongshan have been mothballed and a
non-cash charge of GBP22m has been taken in the period to write
down the value of the associated assets.
Agriculture
Revenue in the first half will be ahead of last year driven by
UK feed sales and AB Vista. With limited alternatives available to
farmers, demand for sugar beet feed in the UK was high in the
period but sales for the rest of the year will be constrained by
the smaller UK beet crop. AB Vista's feed enzyme business continued
to make good progress, particularly in North America, supported by
the success of the recently launched Quantum Blue. China revenues
were below last year, with shortfalls resulting from lower demand
for pig and poultry feed, and Frontier traded at similar levels to
last year. First half profit is expected to show further
progress.
Grocery
Revenue in the first half is expected to be level with last year
and profit will be substantially improved benefiting from the
non-recurrence of restructuring costs in George Weston Foods in
Australia and Allied Bakeries.
Twinings Ovaltine again performed well with some good market
share gains. Production efficiencies at the new tea factory in
Poland and cost reduction initiatives in the Ovaltine plant in
Switzerland drove further improvement in operating profit. The UK
bread market remained highly competitive. The worst UK harvest of
recent years resulted in low volumes of wheat which was also of
inferior quality but Allied Bakeries continued to produce high
quality bread and recovered the higher cost through price
increases. The new bread plant at Stockport has been operational
since September and work is on track to commission the new plant at
Walthamstow in early summer.
Trading at George Weston Foods in Australia met our expectations
in the first half. Price increases have been secured for Tip Top
bread but the market continued to be difficult with a high level of
in-store bakery promotions. Progress was made in the Don KRC meat
business with higher production and sales volumes and improved cost
control and customer service. Revenue at ACH is expected to be
level with last year.
Ingredients
Revenue in the first half is expected to be in line with last
year although 6% higher at constant currency. Changes in exchange
rates had no material effect on profit from trading which was in
line with last year.
Following the difficulties experienced by the yeast business
last year, the performance this period has seen some stabilisation
although the market remains competitive. Yeast quality and
productivity in China has improved and there was some reduction in
molasses costs. The new yeast manufacturing facility in Mexico is
currently being commissioned with first sales expected in the
spring. With the opening of this new facility, a review of dry
yeast capacity will lead to some rationalisation. Good progress was
made in bakery ingredients' sales and margins.
At ABF Ingredients, further growth was achieved in bakery, feed
and speciality enzymes driven by new products launched last year.
Sales of extruded grain products were well ahead of last year and
strong dairy markets contributed to good results in whey proteins
and lactose. The yeast extracts plant in China continued to make
good operational progress.
Retail
Sales at Primark in the first half were exceptionally strong and
are expected to be 23% ahead of the same period last year and 25%
ahead at constant currency. This was driven by very strong
like-for-like sales growth, a substantial increase in retail
selling space and superior sales densities in the larger new
stores. Like-for-like growth of 7% benefited from comparison with
weak sales during the unseasonably warm autumn of 2011 and good
trading over the Christmas period.
Operating profit margin was much higher than in the same period
last year, reflecting the benefit of lower cotton prices and better
trading. No further margin benefit from lower cotton prices is
expected in the second half.
This was an extremely active period for new store openings.
Retail selling space has increased by 0.7 million sq ft since the
last financial year end, and by 1.0 million sq ft, or 13%, since
the 2012 half year. At 2 March 2013, we expect to be trading from
257 stores and 8.9 million sq ft of selling space. We opened 15 new
stores in the period including six in Spain and four in the UK
including our second store on London's Oxford Street, with 82,000
sq ft of selling space. Two new stores were opened in Germany
including one in Frankfurt's Zeil, one of the country's premier
shopping locations. We opened our first two stores in Austria and a
further store in the Netherlands. We also relocated our store in
Sunderland to a larger site, and completed the refurbishment and
extension of our flagship store on Mary Street in Dublin.
This pace of store openings will not continue for the remainder
of this financial year but we expect it to pick up again in the
next financial year. We expect to add a further 100,000 sq ft of
space this year mainly comprising the completion of the extensions
of our Newcastle and Manchester stores. Capital expenditure on new
stores and refits for the full year is expected to be similar to
last year.
For further enquiries please contact:
Associated British Foods
John Bason, Finance Director Tel: 020 7399 6500
Citigate Dewe Rogerson
Chris Barrie, Nicola Swift Tel: 020 7638 9571
Tel: 07770 321881
Jonathan Clare
This information is provided by RNS
The company news service from the London Stock Exchange
END
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