Associated British Foods (ABF) announced that it expects strong sales and adjusted operating profit for the half-year to be “significantly ahead” of a Covid-19 hit 2021.
The firm, which includes brands such as Ryvita and Twinings has seen profit margins hit by surging costs, and confirmed it will increase the price of some products.
In the trading update, ABF claimed to experience increasing inflationary pressures in raw materials, commodities, supply chain and energy, which it attempted to offset with operational cost savings and the implementation of price rises.
Its Twinings Ovaltine arm “performed well” over the period, but the group’s Allied Bakeries business, which makes Kingsmill bread, reported a decline.
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ABF finance director John Bason said the company has “very minimal” exposure to Ukraine and Russia but recognised the ongoing conflict could have an impact upon the business through wheat prices.
“We don’t have material businesses in Ukraine or Russia so would not expect any particular impact in that respect,” he said.
“But we will see if there is an impact on the commodity markets and there is potential wheat prices could move, as Ukraine is a large producer.
“I must clarify that we don’t source our wheat from there – it’s mainly from the UK – but there is potential for cost impacts so we will keep a watching brief on that situation.”
As a result, the business expects further growth in profit in the second half of the year, with “significant progress” expected in adjusted operating profit and adjusted earnings per share.
The news comes after inflation rates reached a 30-year high of 5.5% according to the latest figures from the Office for National Statistics (ONS).
Food and non-alcoholic drink prices rose by 4.3%, the largest jump in nearly a decade.
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