Strong Primark guidance lifts AB Foods outlook

But company warns on sugar business, expecting reduced profit as sugar prices fall

FIPhotograph: Toby Melville/Reuters

FIPhotograph: Toby Melville/Reuters

 

Associated British Foods on Thursday warned again on the outlook for its sugar business, though it maintained its overall guidance for the full 2017-18 year thanks to a stronger performance at its Primark fashion chain.

The company, which also has major grocery, agriculture and ingredients businesses, said it expected progress in adjusted operating profit and adjusted earnings per share in the year to September.

“Compared to our previous expectation, we now expect a reduced profit from AB Sugar as a consequence of lower EU sugar prices and an increased profit from Primark driven by higher margins,” it said.

AB Sugar’s revenue fell 17 per cent in the third quarter to June 23rd, which the group said was entirely the result of significantly lower EU prices which adversely affected its British and Spanish businesses. The group had warned on sugar profits in January.

It said EU sugar prices were continuing to decline driven by low world sugar prices and excess supply following very high sugar production in the EU last year.

For the group’s next financial year (2018-19) this level of EU sugar prices would represent a substantial reduction compared to those achieved this year, it said.

“As a result, our expectations for sales and profit at AB Sugar, both for this financial year and next, are lower than previously expected,” it warned.

For the 40 weeks to June 23rd, group revenue from continuing businesses was 3 percent ahead of the same period last year in constant currency terms.

Sales at Primark were 6 per cent ahead of last year on the same basis.

Shares in the group, down 6 per cent over the last year, closed Wednesday at 2,717 pence, valuing the business at £21.5 billion. The group is majority owned by the family of chief executive George Weston. – Reuters