Primark owner AB Foods says currency effects to dent profit

Associated British Foods reports 2 per cent fall in 2014-2015, forecasts ‘modest’ decline

Associated British Foods, owner of the Penneys/Primark fashion chain and AB Sugar, warned yesterday that currency moves will dent earnings in its new financial year if current exchange rates persist.

The company, which also has major grocery, agriculture and ingredients businesses, reported a 2 per cent fall in 2014-2015 earnings and forecast that currency pressures would lead to a “modest decline” in 2015-2016.

The strengthening of sterling and the dollar, and a weakening of the euro and emerging- market currencies, has a negative effect on the translation of AB Foods’ overseas results and on transactional exposures such as sourcing costs.

Primark, for example, buys clothes from Asia in dollars before selling them increasingly in euro as it expands in countries such as France, Germany and Spain. At current rates, AB Foods estimates a translation impact in 2015-2016 similar to 2014-2015’s £31 million but a greater transactional impact.


The price of shares in the group, majority owned by chief executive George Weston’s family, has risen a quarter over the past year but fell by up to 2.9 per cent yesterday.Credit Suisse analysts forecast a 4 per cent fall in 2015- 2016 adjusted earnings per share (EPS).

AB Foods made adjusted EPS of 102p in the year to September 12th, beating analysts’ average forecast of 98.4p, but below the previous year’s 104.1p. Revenue fell 1 per cent to £12.8 billion while adjusted pretax profit dipped 6 per cent to £1.03 billion. The dividend was increased 3 per cent to 35p.

While operating profit at Primark rose 2 per cent to £673 million, it slumped 77 per cent to £43 million at AB Sugar because of weak prices.

“We’re actually really pleased with these results,” Mr Weston said. “The well-flagged reduction in sugar prices took £146 million off our profit. In EPS terms we recovered almost all of it. Primark continues to grow strongly and the rest of the group was ahead by 17 per cent.”