Over 100 jobs are potentially in jeopardy as the owner of a Yorkshire bioethanol plant, Vivergo, contemplates shutting down operations, attributing the decision to government actions that have "undermined" its viability.
The Salt End, Kingston upon Hull-based facility, which employs approximately 150 staff, has slipped into losses after reducing production due to low bioethanol prices, as reported by .
ABF, the owner of Vivergo, is now considering various options for the future of the site, the largest of its kind in the º£½ÇÊÓƵ, including mothballing or closing the facility.
"The way in which regulations are being applied to bioethanol is undermining the commercial viability of our business," ABF stated.
"We are having constructive discussions with the º£½ÇÊÓƵ government to explore regulatory options to improve the position."
"There is no guarantee that these discussions will be successful, and we will either mothball or close the Vivergo plant if necessary."
The plant annually produces hundreds of millions of litres of bioethanol from locally-sourced wheat and generates around half a million tonnes of animal feed.
'Frustrating' results
Issues at the Yorkshire plant, coupled with a general slump in sugar prices, contributed to pushing ABF's sugar division into a loss of £122m for the six months to March, a stark contrast to the profit of £121m recorded the previous year.
Associated British Foods (ABF) is weighing the possibility of restructuring its sugar operations in Spain, as the company faces significant challenges in the market, including an unsustainable cost base.
The conglomerate's total revenue declined by 2% to £9.5 billion, primarily due to the underperformance of its sugar division. ABF, which is also the parent company of Primark, reported pre-tax profits of £692 million, a 21% decrease from the previous year.
Following the announcement, ABF's shares plummeted 9% to 2,027p, wiping out over £1 billion from the company's market capitalization.
Despite weaker sales in the º£½ÇÊÓƵ and Ireland, ABF's Primark stores in Europe and the US posted strong sales. The company reported "early signs of improvement" in the º£½ÇÊÓƵ and Ireland in recent weeks.
George Weston, the CEO, commented: "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."
ABF maintained its dividend at 20.7p, consistent with the previous year.
Charlie Huggins, manager of the 'Quality Shares Portfolio' at Wealth Club, expressed his thoughts: "There is no doubt that AB Foods faces a challenging environment. But investors will feel it could and should be doing better.
"The performance of the sugar business leaves a bitter taste and with cost pressures building, improving Primark's º£½ÇÊÓƵ sales must be an urgent priority."
