AB Agri warns of further revenue fall

AB Agri’s half year revenues are going to be lower than for the previous year, warns parent Associated British Foods (ABF) in a pre-close trading statement ahead of its interim financials in April. However, margins are improving.

First half Agriculture revenues are going to be lower than for H1 2015, particularly for the group’s UK feed business AB Connect.   Weak demand for ruminant feeds due to the generally mild winter weather has combined with lower sugar beet feed volumes from the smaller planted area for the 2015/16 campaign. The business reports a year-on-year increase in speciality feed product volumes, with an increased domestic market share more than offsetting lower export volumes.

Market conditions were also weak for AB Agri’s feed activity in China, but this was mitigated by improved purchasing and pricing, plus a move to winning more contracts to supply large farm customers.

The AB Vista feed microingredients division drove further margin improvement for AB Agri as a whole, with good feed enzyme sales growth in Asia, Europe and the Middle East.

Frontier Agriculture, the joint venture arable marketing business between AB Agri and Cargill, returned a “resilient” H1 performance. Lower demand for fertilisers and crop protection products in the period was offset by good grain trading income.

Within ABF’s Sugar division, British Sugar won’t benefit from tightening sugar stock levels and the rising prices after recent lows, until next year since current year contracts are already agreed.

With sugar factories now shut, the reduced area 2015/16 UK beet crop is expected to yield around 1 million tonnes of sugar, down from the previous year’s 1.45m tonnes which has led to higher stocks and reduced prices. Operational performance across the four sites remained strong, with a continued focus on cost reduction. The company is investing in an anaerobic digestion plant for biogas at the Bury St Edmunds factory, which should come on-stream later this year.

The Vivergo Fuels bioethanol plant reports improved first half profitability through maintaining an efficient and consistent operating performance and better bioethanol prices.

AB Agri reported full year profitability of £60 million on revenues of £1.21 billion in the year ended September 12th 2015, a respective increase of 20% and fall of 8% on the £50m and £1.31bn from the previous year‘s trading.