INGREDIENTS

The Ingredients segment comprises AB Mauri and ABF Ingredients. AB Mauri has a major global presence in bakers’ yeast, with significant market positions in the Americas, Europe and Asia, and is a technology leader in and supplier of bakery ingredients. It operates from 49 plants in 25 countries. ABF Ingredients markets enzymes, yeast extracts, speciality proteins and lipids worldwide and has manufacturing facilities in Europe, the US and China.

Ingredients achieved a revenue increase of 5% over last year but operating profit fell by 46% as a consequence of significant raw material cost increases, a highly competitive trading environment in many of our markets and substantial commissioning costs of the new yeast factory in China. We nonetheless remain committed to our investment in building capacity and developing a sharper and more differentiated offering for both yeast and bakery ingredients. Profit improvement is expected as molasses costs begin to subside in some of our markets.

The AB Mauri yeast and bakery ingredients business achieved revenue growth throughout the year, driven primarily by good performances in Asia and South America.

However, difficult market conditions in Europe and North America and substantial raw material cost inflation in a number of key markets saw operating profit sharply lower. The European yeast market was extremely competitive all year and weakness in the bakery industry in North America led to lower sales of wet yeast. Full recovery of higher input costs was consequently challenging in these markets.

In China, we achieved good volume growth benefiting from favourable market conditions. Although prices were increased, profit was nonetheless held back. A shortage of molasses, used as a substrate in yeast manufacture, not only drove the price significantly higher, but also drove the need to use higher-cost corn syrup to make up for the shortfall. Profit was further affected by the commissioning of the new yeast facility in Harbin which added to the cost base ahead of full utilisation. A new fresh yeast plant is under construction in Shandong province and dry yeast capacity at our Xinjiang facility is being expanded. These investments, which are expected to be commissioned in 2012, will provide the capacity to support the continuing market growth.

Our performance in Latin America was encouraging, benefiting from strong economic growth and continued development across a broadened range of products. Significant raw material cost pressure here was successfully offset by price increases. In Mexico, growth remained strong and the business will be further strengthened when the new yeast production facility, currently under construction at Veracruz, is commissioned at the end of 2012.

Bakery ingredients had another year of strong revenue growth. Considerable progress was made in building relationships with key global customers, and innovation continued to drive new product development enabling us to maintain technology leadership in key markets.

At ABF Ingredients, sales of feed, bakery and speciality enzymes made good progress driven by the successful introduction of new products and expansion into new sales territories. Speciality lipid sales were encouraging driven by a growth in pharmaceutical excipients underpinned by capital investment and a focus on higher value niche products. Yeast extracts are now supplied to Europe from the new factory in Harbin, China easing capacity constraints at our Hamburg factory and customer service levels have improved as a consequence. Commissioning costs of the factory in China were higher than forecast but it is now fully operational and plant efficiency is improving. Yeast extract margins were also reduced by high molasses costs.