Rising energy and commodity costs delay margin recovery at AB Foods
Owner of Twinings teas and Ryvita crackers faces inflation in all food businesses
Associated British Foods said the increase in energy and commodity costs following Russia’s invasion of Ukraine would delay a recovery in profit margins at its food divisions, even after price rises.
“All our food businesses are experiencing increasing inflationary pressures in many areas including raw materials, commodities, supply chain and energy,” the group said in its half-year results statement.
“As a result, we now expect a greater margin reduction in these businesses than previously expected for the full year . . . the full effect of margin recovery is now anticipated in our next financial year.”
Its food brands include Dorset Cereals, Twinings teas and Ryvita crackers, while it also has food ingredients and bakery businesses.
The group still expects profits to rise in its sugar business and discount clothing retailer Primark has benefited from the easing of coronavirus-related restrictions across Europe.
Pre-tax profit for the six months to March 6 more than doubled to £635mn after sales rose 25 per cent to £7.88bn, largely reflecting the reopening of Primark stores.
At a group level, AB Foods still expects “significant” progress in profit this year. The recovery at Primark also means that a greater proportion of group profit will be taxed at the UK’s relatively low corporate tax rate.
The interim dividend was 13.8p a share, up from 6.2p last year.