Associated British Foods sees sales decline
Associated British Foods (ABF) has reported full year declines in sales and profits following what chief executive George Weston described as “challenges of food commodity deflation and big movements in exchange rates”.
The diverse international group, which not only owns numerous food and beverage brands, but also clothing retailer Primark, reported group revenue in the 52 weeks to 12 September 2015 down 1% to £12.8 billion. Adjusted operating profit was down 6% to £1.09bn and profit before tax also declined 6% to £1.03bn. Had exchange rates remained steady, sales would have increased 2%, the group said in its results.
"We delivered a strong operational performance despite the challenges of food commodity deflation and big movements in exchange rates,” Weston said. “The group continues to generate strong cash flows and to reduce net debt. While marginally down, our earnings per share result underlines the group's strength.”
ABF has 124,000 employees in 48 countries. It has significant businesses in Europe, southern Africa, the Americas, Asia and Australia.
Chairman Charles Sinclair said this financial year had been characterised by continuing investment in businesses with growth opportunities and a relentless drive for improved efficiencies and cost reduction.
“The two major challenges facing the group have been well flagged - food commodity deflation and substantial movements in currency markets.
“A key influence on our food businesses has been deflation in many of our major commodities, making growth in revenues difficult to achieve. The most notable examples are the substantial declines in both the EU and world sugar prices. We have also experienced significant movements in exchange rates with a strengthening of sterling and the US dollar, and a weakening of the euro and emerging market currencies. These movements had a negative effect on the translation of overseas results but also, and increasingly as the year progressed, on transactional exposures.”
Although it was a difficult year for some of ABF’s brands, Weston said that, after a difficult first half of the year affected by higher cost and poor-quality raw materials, the group’s Australian meat business Don KRC had made good progress in the second half “both in volume gains and improved factory efficiency”.
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