Reform of EU sugar regime

Associated British Foods PLC
22 June 2005

                          Associated British Foods plc

    Publication of the European Commission's proposals for the reform of the
                                EU sugar regime



22 June 2005



Associated British Foods plc ('ABF'), the international food, ingredients and
retail group, today notes the publication of proposals by the European
Commission for the reform of the EU sugar regime.  These proposals have yet to
be considered by the European Parliament and their final form to be agreed by
the Council of Ministers.  The ABF businesses affected by these proposals are
the sugar operations of British Sugar in the UK and Poland.



A number of key aspects of the Commission's policy orientation paper published
in July 2004 have been significantly modified.  The proposed new regime will run
from 2006/7 until 2014/15 with no mid-term review as originally suggested.
There is a restructuring scheme, funded by a levy on the beet industry, designed
to compensate marginal producers who would relinquish their quota with
incentives for early redemption.  It is anticipated that this scheme will
deliver the reduction in EU production sought by the Commission.  There are no
mandatory quota cuts.  These proposals are welcomed by British Sugar as one of
the most efficient producers in the EU.  In addition there is the option of
purchasing 83,000 tonnes of quota for the UK beet sugar business and
approximately 10,000 tonnes for the Polish business.



The proposals include the restructuring levy, payable over 3 years commencing in
2006/7, and reductions in the reference price for sugar of 24% in 2007/8 rising
to 29% and 39% in the subsequent years.  The UK beet price will be reduced by
31% in 2006/7 rising to 47% in 2007/8 and thereafter.  The current export
producer levy will be removed and a lower 'production charge' will be introduced
from 2007/8.  Exports of non-quota C sugar may be phased out over the next few
years.  British Sugar has announced its intention to build the UK's first
bioethanol plant, using this sugar, which is expected to commence production in
early 2007.  We believe that these proposals provide a framework for an orderly
adjustment to the EU sugar market.



Our best estimate is that the operating profit impact on our sugar operations
which results directly from the above will be some £10m in 2006/7 and some £40m
in 2007/8 and thereafter.  However, we expect these effects to be in part
mitigated by cost reductions in both the UK and Poland and the exploitation of
new revenue opportunities including the processing of cane raws.



For further information please contact:



Associated British Foods
John Bason, Finance Director                  Tel: [phone]
Geoff Lancaster                               Tel: [phone]


Citigate Dewe Rogerson                        Tel: [phone]
Jonathan Clare / Chris Barrie / Sara Batchelor


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