Allied Bakeries to commission its largest bread plant

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Allied Bakeries to commission its largest bread plant

April 20
11:06 2013

Allied Bakeries is on target to commission its largest bread plant, with a capacity of 10,000 loaves an hour, at Walthamstow in East London this summer.

The Associated British Foods (ABF) subsidiary has also started work at its bakery in West Bromwich to replace two smaller production lines with a new bread plant, which is expected to be operational by the end of the year.

Allied Bakeries’ new bread plant at Stockport has been operational since September.

This bakery investment by ABF has continued despite the highly competitive nature of the UK bread market over the past few years. The sector was also hit last year by the worst UK harvest of recent years, resulting in low volumes of wheat of inferior quality.

These details emerged today [August 23] as ABF, which is also the parent group for Primark clothing stores, British Sugar, Jordans and ethnic food manufacturer Patak’s, with operations across the globe, reported an “excellent” half year (H1) performance, with revenues up 10% to £6.333bn and adjusted profit before tax up 25% to £452M.

Sugar operations

ABF’s Primark and sugar operations were the stars of the show for the 24-week reporting period to March 2 2013. The Primark results are notable since they were achieved during a difficult time for many high street retailers.

According to Investec’s analyst Martin Deboo: “The two key divisions of Primark and Sugars, which comprised 77% of H1 profits, both beat our expectations on the operating line, by 6% each.”

C ommenting on the results, chief executive George Weston said: “This is an excellent set of results with adjusted operating profit [£496M] up 20%, a stronger cash flow and a year-on-year reduction in net debt.”

The recent weakening of sterling, particularly against the US dollar, increased net debt since last year end by £57M when foreign currency borrowings were translated into sterling at the half year. Net debt nevertheless fell by £255M from last half year to £1.337bn at the period end, after a net capital investment of £334M.

Weston added: “We are committed to the long-term development of our businesses through investment. These results have been achieved through a focus on generating good returns from the investments we have made over recent years.”

Improved result from Grocery

ABF chairman Charles Sinclair said: “Our food businesses remained on track with a much improved result from grocery, a big increase for agriculture and some stabilisation in underlying trading at ingredients. After last year’s record performance from sugar, the result this half year proved to be resilient.”

Sinclair added: “Grocery profit improved substantially and benefited from the non-recurrence of restructuring costs taken last year. Twinings Ovaltine and our UK and US businesses performed well.” Also, Twinings sales in the UK were well ahead of last year.

He noted: “Payment of deferred consideration on the acquisitions of the Jordans and Patak’s businesses, net of a deferred receipt on the disposal of our former sugar business in Poland, resulted in an outflow of £30M in the period.”

ABF’s grocery division was affected by the challenges facing the consumer food industry in developed countries, with consumers seeking more value as their disposable incomes were squeezed.

The grocery division reported an operating profit of £97M for the period on revenues of £1.832bn, which compared with £75M and £1.813M for the same period last year. The significant increase in profitability was attributed to the non-recurrence of restructuring costs in George Weston Foods in Australia and Allied Bakeries. However, Allied Bakeries has continued its capital investment over the period to reduce its cost base.

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