Associated British Foods which owns AB Sugar reported on 3rd November a 30% drop in 2015 profit impacted by strength of sterling and 77% fall in profit from its sugar business.
ABF said pretax profit fell to £717 million ($1.11 billion) in the 52 weeks ended Sept. 12 from £1.02 billion in the previous fiscal year, on a 1.1% decline in revenue to £12.80 billion. AB Sugar’s operating profit declined from £189 million in 2014 to £43 million in 2015.
Glut in global sugar supply and low prices (declining to below 11.0 cents per pound at one point) has impacted profitability.
2014/15 UK sugar production of 1.45 million tonnes is expected to decline to 1.0 million tonnes in 2015/16 on the back of contracted acreage reduced by over 25% and a return to more typical beet yields. 2014/15 output was “driven by very high beet yields and excellent factory performances”.
In Spain, beet sugar output at AB Sugar’s factories was 414,000 tonnes, while 295,000 tonnes from refined raw sugars. The acreage under beet cultivation for 2015/16 is expected to be similar to 2014/15.
Illovo produced 1.64 million tonnes in the year to September, marginally less than last year. The effect of drought on cane growth in South Africa was largely offset by strong production volumes across all other countries of operation. Zambia achieved record sugar production and further development at the factory is now planned which will increase sugar refining capacity and create new sugar conditioning and storage facilities to enable the supply of higher quality sugars to the region. The Malawi sugar market has been seriously disrupted by the country’s continued economic difficulties and sales volumes and prices were lower as a result. In Tanzania, sugar production increased with the benefit of better growing conditions and an improved factory performance. Some improvement in the local trading conditions enabled an increase in domestic pricing and an improved sales mix, with pre-packed sugar taking an increasing share of the domestic market. Illovo continued its focus on the development of domestic and regional sales which have become increasingly important as world and EU prices become less attractive.
In China, cane sugar output fell from 560,000 tonnes in 2013/14 to 413,000 tonnes in 2014/15 due reduced acreage and adverse weather condition impacting yield – factory extraction rates were good though. At the remaining beet sugar factories, Qianqi and Zhangbei produced 94,000 tonnes of sugar in 2014/15.
ABF stated that it took a £100m non-cash loss on the sale of two uneconomic factories (Yi’an and BoCheng) in Heilongjiang.