ABF Comments On AB Agri's Contribution To FY Results

The following is an extract from ABF's FY ended 13th Sept 2008 annual results statement:

AB Agri, our agriculture business, had a very strong year during which the combination of its trading skills, market knowledge and customer relationships enabled it to outperform a market characterised by extremely volatile raw material prices.

European grain prices doubled during the first half of the year and low grain stocks worldwide, unpredicted weather events and heavy trading in the commodity markets resulted in unprecedented levels of daily price volatility. Stronger feed prices were sufficient to offset higher raw material and energy costs, lower volumes of molassed sugar beet feed and increased production costs in our ruminant feeds business.

Frontier is our grain supply joint venture. It has a strong balance sheet, access to working capital and superior market knowledge which differentiate it from its competitors. Through its leading market position, unique centralised operating structure and national trading system, it was ideally placed to manage the extreme price volatility during the year on behalf of its grain customers and farmer suppliers. Moreover, higher cereal and oilseed prices encouraged an increase in UK sowings resulting in a more buoyant market for Frontier’s fertilisers, seed varieties and crop protection products. As expected, the business has now concluded an agreement to supply Vivergo with over one million tonnes of feed wheat for its bioethanol facility.

We are establishing an increasingly international presence in the high technology, high added-value feeds market which specialises in micro-feed ingredients that enhance nutrient absorption and provide a better return for farmers. Sales of feed enzymes by AB Vista were particularly buoyant with several new products launched and a doubling of the number of countries served over the last two years. New sales offices in the US, Mexico, India and China were established during the year.

Our feeds business in China was relatively untouched by the widely reported natural disasters that occurred there. We achieved strong sales growth in each of the species markets that we supply. Our mill building programme is continuing and on completion will deliver a 20% increase in production capacity.

AB Agri is taking a central role in a number of schemes to promote sustainable agricultural practice. The first Carbon Trust accredited, greenhouse gas reduction model for dairy farms was launched to Sainsbury’s dairy suppliers and our WildCare scheme on biodiversity, which we operate in conjunction with Waitrose, was awarded the Green Apple Award for “Environmental Best Practice”.