Allied Bakeries has entered a strategic review in light of what parent company Associated British Foods (ABF) described as a “very challenging market”.
Today, 29 April, ABF disclosed results for the 24 weeks ending 1 March, revealing declines in both revenues and operating profits for the group overall, particularly affecting the grocery division that encompasses Allied Bakeries.
While sugar, part of ABF’s ingredients business unit, negatively influenced overall operating profit, the Kingsmill and Sunblest brand owner Allied Bakeries significantly pressured profits within the grocery segment.
“Our UK-focused businesses declined overall. As expected, this was primarily due to lower volumes and sales in Allied Bakeries, which resulted in an increased operating loss,” ABF highlighted in its report.
“Allied Bakeries continues to face a very challenging market. We are evaluating strategic options for Allied Bakeries against this backdrop and we expect to provide an update in H2 2025.”
In addition to the Kingsmill brand, Allied Bakeries produces Allinson’s bread and supplies UK retailers and supermarkets with private-label bread products.
ABF, which also runs Primark clothing stores, does not disclose the financial performance of Allied Bakeries or other food brands within grocery, including Twinings tea and the Patak’s and Blue Dragon sauces lines.
Group results revealed a 2% decline in sales to £9.51bn ($12.73bn) for the period ending 1 March, while adjusted operating profit decreased by 12% to £835m.
Profit before tax fell by 21% to £692m, accompanied by an 8% decrease in earnings per share to 83.6 pence.
Today, ABF’s shares dropped more than 6% to 2,091 pence, diminishing the year’s gain to 1.5%.
In light of these results, Shore Capital has placed ABF’s shares “under review” from their previous buy rating.
Consumer goods analyst Clive Black from Shore Capital noted in a research note: “Allied Bakeries remains an unwelcome problem child with more demonstrative talk about solutions from management.”
He elaborated, “As for grocery and ingredients, one or two frustrations aside, notably the long-running issue that is UK bakeries where strategic options are being examined, the reality is that ABF has been earnestly seeking a better medium-term outcome and possesses a strong portfolio of valuable brands.”
In terms of grocery, ABF’s sales revenue decreased by 2% to £2.09bn. Operating profit remained flat at £219m, while adjusted operating profit fell 1% to £227m.
ABF stated that it recorded “good sales growth” across most grocery brands, with the exception of Allied Bakeries and the US cooking oils business, including the Mazola brand.
Group CEO George Weston remarked: “These results reflect a robust performance in four of our five divisions. I am frustrated with the results in our sugar business, but we are clear on what needs to be done by way of operational and regulatory solutions to improve financial performance.”
He added, “Looking ahead, in an operating environment filled with significant uncertainties, the group remains well-positioned, and our strong balance sheet enables continued investment for long-term sustainable growth.”
ABF further noted in its commentary: “We continue to expect overall performance this year to reflect the normalization of profitability in our US-focused businesses and an operating loss in Allied Bakeries.”
