Associated British Foods said first half trading was in line with expectations but warned of higher sugar costs later this year following the wintry weather.

Adjusted operating profit would be ahead of last year in all segments except ingredients as a result of higher molasses prices in China, competition in European and US yeast businesses and extra costs from a new yeast extracts factory in Asia.

ABF’s sugar business held up well with Spain and China driving growth. However, UK profits would be hit in the second half by about £20m with increased processing costs following last winter’s cold snap. Sugar production had fallen from 1.3m tonnes last year to just below one million tonnes this year, the company said.

Grocery profit in the first half was boosted by Twinings Ovaltine with good UK performance but George Weston Foods in Australia “disappointed” due to price deflation and increased competition in the bread and meat businesses.

Price hikes had been implemented in the US and Mexico to recover higher commodity costs, particularly in corn oil and spices, but further increases would be necessary, ABF warned. 

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ABF hails ‘exceptional year’ as profits soar (09 November 2010)
Kingsmill and Primark buoy sales at Associated (08 July 2010)