ABF buys vinegar firm as weak sterling boosts profits

The Kingsmill bread and Silver Spoon sugar owner benefitted from currency fluctuations in its Grocery division, to boost revenue and profits. Two thirds of the group’s operating profit was earned outside of the UK, translating into an £85M boost this financial year for the 52 weeks to September 16.

An ABF statement said: “The result of the UK referendum on EU membership saw sterling weaken substantially in June 2016 against all major currencies. The euro’s strength in the second half has had a beneficial effect on British Sugar’s margin.

‘Higher operating profit’

“The operating cash inflow will be much greater than last year, driven by the higher operating profit and a reduction in working capital achieved with significantly lower sugar stocks and the benefit of tight management by the businesses during the year.”

The Twinings tea brand performed well in its key markets over the 52 weeks. Sales increased in the UK after significant investment in tea packaging technology was completed, ABF said.

Jordans and Dorset cereals is now being sold in 75 countries, with overseas sales greater than in the UK for the first time. Increased own-label products meant trading was challenging in the UK for the cereal brand.

‘Abnormal low’

The Sugar division’s adjusted operating profit will be well ahead of last year, ABF said, despite sugar production in the UK falling to an “abnormal low”. The manufacturer reduced its contracted growing area this year, after it produced a large amount of stock last year.

Meanwhile, ABF has today (September 11) revealed an agreement to buy Italian vinegar producer Acetum. The £94M (€103M) business sells a range of vinegars, condiments and balsamic glazes to more than 60 countries.

ABF will grow Acetum’s brands – which included Mazzetti and Balsamic Vinegar of Modena – and the acquisition will broaden its international presence in speciality foods, it said.