Milling & Baking News - July 27, 2004 - 16

I N T E R N A T I O N A L

A.B.F. grows in ingredients with
acquisition from Burns Philp
Continued from Page 1
officer of Associated British Foods.
"They have a significant presence in
growing markets, strong market positions and are cash generative. The broad
international footprint will be an excellent platform for further growth."
The businesses to be acquired had
$129 million in profit and $708 million
in sales in the year ended June 2003. Net
tangible assets totaled
$393 million.
Of the businesses to be
acquired, bakers yeast is
the largest as measured
by sales, accounting for
40% of the fiscal 2004 total.
Baking ingredients accounted for 20%, and spices and herbs sales were
28%. The balance was 5%
for consumer yeast and
7% for yeast extracts.
Geographically, North
America accounted for
48% of fiscal 2004 sales;
South
America,
20%;
Europe, 15%; and Asia/
Australia, 17%.
Providing background
on the global yeast industry, A.B.F. estimated
annual sales of $1.5 billion with volume of 2.3 million tonnes.
"Growth is driven by population and
bread consumption," A.B.F. said. "It is
1% to 2% annually in developed countries and much higher in developing
countries driven by the changes of diet
which result from increased affluence.
Three international companies have a
combined market share of over 50% with
the remainder being local companies."
In a webcast following the announcement, Mr. Jackson noted that
annual growth in China exceeds 10%
with growth rates of 6% in India and 4%
in South America.
Fresh yeast, delivered as a chilled
product, accounts for the largest part
of the commercial baking business, Mr.
Jackson said. Additional baking trends
that are positive for yeast usage are longer shelf-life bread and variety bread, he
said. These products use more yeast than
traditional white bread.
The yeast brands A.B.F. will acquire
include Fleischmann, Mauri and Calsa.
Profitability of the U.S. yeast business
has been depressed in recent years,
but better results have been achieved
in other markets. Mr. Jackson, though,
characterized even the U.S. business as a
16 / Milling & Baking News, July 27, 2004

"good contributor to profit." It is headed
by Frank Schoonyoung, president. A.B.F.
said Burns Philp is the market leader in
North America, Latin America and Asia
and ranks third in Europe.
A.B.F. plans to integrate the yeast business into its Ingredients segment. "We
know we will be able to leverage A.B.F.'s
operational skills to reduce costs," Mr.
Jackson said. "We can use A.B.F.'s cash

to fund capital improvements. And we
can use A.B.F. resources for geographical
expansion where appropriate."
A.B.F. said the Burns Philp baking
ingredients business grew on the shoulders of its yeast sales and distribution
capabilities. Principal products include
bread improvers, conditioners, mixes
and fats and oils. The company has six
manufacturing sites and 11 more sites
are shared with yeast.
These businesses would be combined
with the A.B.F. Cereform unit, which
operates in the United States, the United
Kingdom and Australia. Cereform focuses on "high value bread improvers,
conditioners, concentrates and enzymes"
supplied to commercial bakers, A.B.F.
said. Cereform operates under the umbrella of the Abitec Group. In the U.S., the
business is headquartered in Denver.
Mr. Jackson said the company is the
global leader in fluid improver technology, improvers supplied in non-powdered forms. Cereform growth has been
"limited by scale and limited by geographical reach," he added. The acquisition will help solve that, he said.
Commenting on the Burns Philp and
A.B.F. baking ingredients businesses,

A.B.F. said the two businesses fit together
extremely well with exceptional growth
prospects worldwide. "The combined
business will have sales of over $300 million and have coverage of all significant
markets, unrivaled market access in developing markets, low cost distribution
through sharing of overheads with yeast
and leading technology for western style
baking," A.B.F. said.
A.B.F. also plays a role in baking ingredients through its ACH Foods Companies, based in Memphis. The company's
industrial division, Humko Oil Products,
develops and manufactures
custom-designed fats and
oil ingredients. The company also is active in the
food service and consumer
sectors with brands that
include Mazola corn oil in
consumer and food service
and Sweetex cake and icing
shortening in food service.
The business is incorporated into the A.B.F. Grocery
segment.
Mr. Jackson reiterated the
company's strategy for ACH
to exit commodity oil processing and focus on retail
and food service. "We have
exited a lot of our commodity oil processing by plant
closures and outsourcing,"
he said.
With the acquisition, A.B.F.
will merge the acquired spice business into
ACH Foods. The spice business is retail
and food service oriented, with brands that
include Tone's, Durkee and Spice Islands.
Manufacturing is based in Ankeny, Iowa, in
a new facility just outside Des Moines.
Burns Philp had first announced plans
to sell its Tone's spice business in March.
The company said that 25% of proceeds
from the sale will be applied against debt
with the balance placed in cash reserves.
In April 2003, Burns Philp acquired
Goodman Fielder, Ltd., the largest Australian-owned food company and a major baker in Australia and New Zealand.
Across its entire business, A.B.F. has
annual sales of £4.9 billion ($9 billion)
and more than 35,000 employes. A.B.F.
operations include a major grocery products business of which milling and baking
account for two-thirds of sales and include
19 baking plants and 13 mills. The division
includes Allied Bakeries, which has more
than a 33% share of the U.K. bread market.
In Australia, A.B.F. owns Weston
Foods, a major producer and processor
of branded food products. The company's operations include baking, milling,
meat and dairy, animal nutrition, ingredient and cleaning products. MBN
bakingbusiness.com / world-grain.com

http://www.bakingbusiness.com http://www.world-grain.com

Milling & Baking News - July 27, 2004

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