Government's Alleged Undermining Leads to Potential Shutdown of ABF's Yorkshire Plant
Rewritten Article:
A potential shutdown looms for a bioethanol plant in Yorkshire, putting more than 100 jobs on the line. The operator of the Salt End plant, Vivergo, cites government actions undermining the facility's commercial viability as the reason for the potential closure.
Situated in Kingston upon Hull, the plant employs approximately 150 workers and is the largest of its kind in the UK. If the closure goes ahead, it will reduce production of hundreds of millions of liters of bioethanol annually from locally-sourced wheat and nearly half a million tonnes of animal feed.
ABF, the owner of Vivergo, is considering multiple options for the site's future, including mothballing or complete closure. In a statement, ABF expressed frustration over how bioethanol regulations are being applied, which has eroded the business's profitability.
The company is engaging in discussions with the UK government to explore regulatory solutions that could improve the plant's financial position, though they warn that success is not guaranteed. If necessary, they will choose to mothball or close the plant.
ABF's CEO, George Weston, told City AM that the company has been handicapped by the government’s decision to double-count renewable fuel certificates for foreign producers, giving them an unbeatable cost advantage.
"We really are doing everything we can to save that plant, we don't want to mothball or shut it but we may be forced to," said Weston.
According to Weston, the Yorkshire plant wasn't obligated to suffer these consequences; the government chose to take the action that has put the business in such a precarious position.
Mixed Results
Problems at the Yorkshire plant, coupled with a decline in sugar prices, contributed to ABF's sugar division losing £122m for the six months to March, contrasting a profit of £121m in the previous year. The company is also contemplating a restructuring of its Spanish sugar business due to deteriorating market conditions.
Overall revenue decreased by 2% to £9.5bn over the period, primarily due to poor performance from the sugar unit. Pre-tax profits fell by 21% to £692m.
Shares plummeted by 9%, erasing £1bn from the firm's market cap despite strong sales in Primark stores in Europe and the US. The weak performance in the UK and Ireland, however, offset these gains, though Weston reported early signs of improvement in recent weeks.
Weston acknowledged his frustration with the sugar business's performance but expressed confidence that operational and regulatory solutions could help improve the financial outcomes.
"These results reflect a robust performance in four of our five divisions," said Weston. "I am frustrated with the results in our sugar business."
The company declared a dividend of 20.7p, consistent with the previous year.
Charlie Huggins, manager of the 'Quality Shares Portfolio' at Wealth Club, expressed concern about ABF's struggles in the sugar business, stating, "The performance of the sugar business leaves a bitter taste." Huggins added that improving Primark's UK sales should be a top priority for the company.
- The restructuring of ABF's Spanish sugar business is being contemplated due to deteriorating market conditions, adding to the numerous pressures facing the conglomerate.
- The potential closure of the bioethanol plant in Kingston upon Hull, resulting from government actions that undermine its commercial viability, poses a significant risk to more than 100 jobs in the industry.
- ABF's CEO, George Weston, has stated that the company is doing everything possible to save the bioethanol plant in Yorkshire, despite the unbeatable cost advantage foreign producers have due to government policies.
- The financial position of the bioethanol plant could potentially improve if regulatory solutions are found through discussions with the UK government, though success is not guaranteed.
