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Food firm takes sugar hit, but expects prices to recover

PUBLISHED: 16:11 25 April 2019 | UPDATED: 16:19 25 April 2019

Steam pipes out of chimneys at the British Sugar factory in Bury St Edmunds. Its owner, AB Sugar, says production has fallen from last year's record high  Picture: SU ANDERSON

Steam pipes out of chimneys at the British Sugar factory in Bury St Edmunds. Its owner, AB Sugar, says production has fallen from last year's record high Picture: SU ANDERSON

A food and clothing giant which saw its sugar profits plummet in the first half of its financial year expects them to bounce back.

Sugar beets awaiting processing at the British Sugar factory in Bury St Edmunds  Picture: SU ANDERSONSugar beets awaiting processing at the British Sugar factory in Bury St Edmunds Picture: SU ANDERSON

AB Sugar, the sugar arm of Primark owner Associated British (AB) Foods, saw revenues fall from £881m to £769m, and adjusted operating profits plummet to £1m compared to £106m the previous year. At the same time, the latest UK campaign – or harvest - has seen sugar beet production fall from last year's record high.

AB Foods boss George Weston said profit at AB Sugar was “substantially reduced” but, from this period, the company expected its sugar profitability to improve.

MORE – East Anglia's sugar beet campaign 'progressing well' - but growers face price cut next year

“AB Sugar revenue was well down on last year in the first half, as expected, with lower European Union (EU) contracted sugar prices impacting our UK and Spanish businesses,” the company said.

The profits decline was the result of lower prices, a poor crop in China and a later phasing of profit at its Spanish plant at Illovo this financial year, it said.

But stock levels in the EU are down for 2018/19 as a result of lower sugar production, and it expects to see a reduction in the total European crop area for the 2019/20 season, with the UK crop down by 7%.

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“Stocks are likely to remain low which should underpin spot EU sugar prices following their recent recovery,” it said.

In the UK, sugar production is at around 1.15m tonnes compared to the previous 1.37m tonnes – a 16% fall on last year when beet yields reached record levels.

The UK campaign benefited from good harvesting conditions as a result of dry weather, and consistent factory throughputs, it said.

Looking ahead, there has been good take-up by growers of sugar beet contracts for the 2019/20 season, although an EU ban on neonicotinoids a pesticide treatment for cabbage stem flea beetle could have an impact, it warned.

“Early drilling, as a result of the mild, dry spring, should result in improved beet yields,” it said. “However,the range of crop estimates is wider than usual due to the potential impact of the ban on neonicotinoids as a seed treatment from this year.”

The group's AB Agri revenue went up by 8% in the first half, driven by higher feed sales in the UK and China.

In the UK,compound feed volumes were higher due to increased demand in the pig and poultry sectors. Sales of sugar beet feed fell due to the mild winter, although they are expected to recover in the second half.

British Sugar has plants across East Anglia at Bury St Edmunds, Wissington, Cantley and Newark.

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