AB Foods Regulatory News (ABF)

8 Dec 2006 11:07

Associated British Foods PLC08 December 2006 AGM Statement 8 December 2006 Good morning Ladies and Gentlemen. I am delighted as your Chairman to welcomeyou to the seventy first Annual General Meeting of our company, AssociatedBritish Foods. It is good to see so many of you here. It is just past the appointed hour of 11 o'clock so apart from a reminder, as acourtesy to others, to switch off mobile phones we'll get started. I am joined on the platform by my colleagues on your Board and by our companysecretary, Paul Lister. Regular attendees amongst you will no doubt havespotted two new faces this year and I would like to take a moment to introducethe new non-executive directors to you. Brief CV's of both are on page 29 ofthe Annual Report. On my right is Lord Jay of Ewelme. Michael, could youplease stand so that shareholders can identify you. On my left is Mr JavierFerran. Javier, please stand also. Both new directors bring a wealth ofexperience developed in their very different career paths. A common feature,however, is their very extensive international experience which, with their manyother abilities, will be of great value to ABF with its global range ofoperations. I welcome both Lord Jay and Mr Ferran to the Board. To our formal business then. There is a quorum present and I therefore open themeeting. You may find it helpful to follow the proceedings by referring to theNotice of the Meeting which you will find this year on page 120 of the AnnualReport and Accounts. I apologise for the size of the report this year - theincrease is mainly due to the demands of accounting and other reportingrequirements. In view of the length of the Notice of the Meeting I will, with your permission,take it as read. The formal part of our meeting today consists of twelve resolutions which I willput to the meeting, after each of which I will invite your questions. Before weget to that however I would like to make a few remarks. The Annual Report and Accounts, which you received some weeks ago, includes fullcomment on the past year's trading. I will only mention a few important issues.It was an unusual year on the trading front. Many of our businesses includingAB Mauri, ACH in North America and the hot beverages businesses made goodadvances; and so did Primark. However, two major factors offset this growth.The impact of sugar regime reform cost £34m and rises in energy costs £64m.Most of the latter could not be recovered in pricing. In this context operating profits were only marginally ahead and profits net ofinterest and tax fell to some extent. It is a sign of your Board's confidencein the group's longer term prospects that one of the resolutions today proposesan increase in dividend for the year of 4%. Another difficulty we faced, and the word 'difficulty' is a euphemism, was thedisastrous fire at Primark's UK warehouse just over a year ago. That this hadrelatively little impact on profits is a huge tribute to Primark's management.Their sales and operating profits grew by 18%. The fire came just as Primarkprepared for the conversion and roll out of ex Littlewoods stores. I am glad toreport that this programme has proceeded on time and on budget. The opening ofour new Dunfermline store on Tuesday this week brought the total of formerLittlewoods stores converted and opened since the acquisition to 36. We are nowtrading from 160 stores in the UK, Ireland and Spain. We have a further fiveformer Littlewoods stores preparing to open in the New Year along with otherstores outside this acquisition. Not least of these is the major London storedue to open in the Spring on Oxford Street. We estimate that by the end of 2007we will be trading from 4.5 million sq ft compared with 2.5m only 15 months ago. More than any year for the last decade, the past year must be viewed as one ofsignificant change; and one which lays the foundations for strong, sustainablegrowth in the years ahead. It is for this reason that a mere glance at thenumbers is insufficient to grasp the importance of some of the major moves madeto strengthen the group for the future. To understand fully the significance of this, it is necessary to examine thenature of the group a few years ago. In 2000, more than three quarters of ourprofits came from UK-based operations with the rest spread broadly evenlybetween the Americas, Asia Pacific and the rest of the world. In theintervening period we have used our financial resources and strong cashgeneration, to reinvest in our core businesses and complete a succession ofvalue adding acquisitions (Mazola, Capullo, Ovaltine, AB Mauri, Littlewoods andIllovo). We have strengthened our positions in international hot beverages andbranded grocery, taken a leading position in global yeast and bakery ingredientsproduction and backed the growth of Primark. This has had a profound impact onthe diversity and balance of the ABF group. When we report next year we expectto see the proportion of profits from the UK representing less than a half, withone fifth from the Americas, a little more than this from Europe, Middle Eastand Africa and the balance in Asia Pacific. We are better placed for growth not only from the geographical perspective. Thedevelopments that have taken place since 2000 have seen the emergence of a broadspread of businesses of scale. At that time British Sugar's UK operations wereby far the greatest profit contributor. Primark's contribution was less thanhalf of British Sugar's. None of our other businesses contributed more than£25m of operating profit. British Sugar faced European sugar regime reform atsome point in the future. The past year has brought into focus our response to this challenge. First,growth prospects have been restored to the sugar business from an uncertainposition. Next year we will be the world's second largest producer, one thirdof that production coming from the most efficient plants in the EU and twothirds coming from plants located in China and Southern Africa, two regionsexperiencing some of the most rapid rates of consumption growth in the world.They also include some of the lowest cost operations in the world. Further intothe future we should not discount the potential offered by our partnerships withBP and DuPont on biofuel development in the UK. Much of the focus of recent years has been on our sugar and fashion retailingbusinesses. However, we have also developed a number of other substantialbusinesses each representing positions of scale in their respective sectors.Notably these include our global yeast and international hot beveragesbusinesses as well as the North American grocery operations. These, and ourother businesses, have also been backed with investment to develop their scale. At this point I wish to pay tribute to all the people around the world who workin the ABF group. Without their skills and determination none of this couldhave been achieved. We are delighted that one of the products of the success ofPrimark is the creation of more than 3,500 jobs this year alone. More is tocome. Competition locally for posts is always keen yet Primark is mindful ofits community obligations and has, for example, supported initiatives fortraining and settlement of the long term unemployed. At the very end of the year we were joined by 27,000 new colleagues, theemployees of Illovo Sugar in Southern Africa. We look forward with keenanticipation to working with them as they aim to realize the full potential ofthis excellent business. Let me turn now to current trading. The markets in which our businesses operateremain competitive. Volatility in some commodity prices and fluctuations incurrencies will affect the economic environment. The group's recent majorinvestments will be reflected in trading profits, particularly due to theadditional floor space at Primark and the inclusion of Illovo's results. Netfinancial costs will also reflect the heavy investment. Operating profits in the current year to date have been in line with ourexpectations. We anticipate progress in adjusted earnings per share over thefull year although the profit increase will be more weighted to the second half. Looking beyond the current year, I am confident that the recent investment anddevelopments give a strong basis for future progress. We will continue to backour businesses with appropriate levels of investment. For further information please contact: Associated British Foods plcJohn Bason, Finance DirectorTel: +44 (0)20 7399 6500Geoff Lancaster, Head of External AffairsTel: +44 (0)7860 562 659 Citigate Dewe RogersonJonathan Clare, Chris Barrie, Sara BatchelorTel: +44 (0)20 7638 9571 This information is provided by RNS The company news service from the London Stock Exchange