Kingsmill Allied Bakeries Associated British Foods

ABF is set for improved profits in its grocery division

Associated British Foods has reported that full-year operating profits in grocery will show a “substantial improvement” over last year.

In a pre-close statement, it said today grocery profits would benefit from the non-recurrence of restructuring costs in Allied Bakeries and George Weston Foods in Australia.

ABF also said Twinings Ovaltine will post “excellent sales and profit growth”, while Allied’s market share had grown after the baker picked up The Co-op supply contract in April.

The company said group operating profits in the second half of the year would be “ahead of expectation” thanks to a strong finish to the year from Primark.

However, the sugar side of the business has taken a knock. ABF said it had sustained a significant loss in China because of lower sugar prices and in the UK British Sugar volumes were down on last year.

The company said that looking forward to 2013/2014, crop yields in the UK are expected to be slightly below average and added that current negotiations with EU customers for the 2013/14 year were proving challenging.

“Management’s message on the challenges for the sugar business looking forward to 2014 seem increasingly cautious,” said Bernstein analyst Andrew Wood.