8th Sep 2014 07:02
LONDON (Alliance News) - Associated British Foods PLC Monday reiterated its guidance for earnings per share to be substantially higher this year, with strong operating profit from its Primark and Grocery arms and an improvement in its Ingredients business offsetting the problems in its Sugar business and a currency hit to its overseas results.
The group said it expects sales for its Primark discount clothing retail arm to be 17% ahead of last year in the twelve months to 13 September on a constant currency basis and up 16% at actual exchange rates. It said the rise was driven by an increase in retail selling space over the period, like-for-like sales growth expected to be 4.5% ahead of last year and superior sales densities in its new stores, meaning sales per square foot.
It said the strong like-for-like sales for Primark in the year were driven by its autumn/winter and spring-summer ranges, with Christmas sales also strong, and sales boosted as well by the warm weather in the third quarter, particularly in the spring and early summer period.
In the financial year, it opened 1.4 million square feet of selling space in 28 new stores and closed 7 stores, mainly where larger and better-located real estate became available in the city. Following the announcement in April of its plans to enter the northeast US market with the opening of a store in Boston, Massachusetts, due to open in late 2015, the group said it was in negotiations to secure further US northeast-based stores with plans to be operating from ten sites by late 2016.
The group's Grocery business is set to show strong growth in the year, ABF said, with its George Weston Foods in Australia, ACH Foods in the US and Twinings Ovaltine business all showing stronger performances year-on-year. It said revenue from the unit is set to be broadly in line with last year at constant currency but will be impacted by the strength of sterling on the translation of its overseas results.
ABF expects to take a total hit of GBP50 million to its results across all divisions due to the strength of sterling and the impact of translating overseas results into the currency.
Its Ingredients business is set to see revenues ahead of last year on a constant currency basis, but at actual rates revenue is expected to be down. AB Foods said its AB Mauri business did manage to build on its improved performance in the first half with a further recovery in the second.
But the AB Sugar business once more weighed on the group's results, with revenue and operating profit set to be substantially lower year-on-year on the back of falling European sugar prices, lower volumes from north China, and a currency translation impact on the unit's operating profit to the tune of around GBP20 million.
It said the global sugar price is continuing to sit at an "unsustainably low" level of an average of 17 cents, well below the average cost of production. For the European market, prices were driven lower by competition among producers trying to position for growth in new markets ahead of the removal of quotas in 2017, along with a higher-than-normal quota stock level across Europe due to exceptional measures taken by the European Commission in the prior year, ABF said.
ABF said contract negotiations were ongoing with EU customers for the 2014/15 marketing year, with significantly weaker selling prices than the current year being realised. In addition, the AB Sugar business is to take a further GBP20 million charge on its operating profit for the year to provide for restructuring costs, AB Foods said, noting this had been previously announced.
The group will release its full-year results for the 52 weeks to September 13 on November 4.
At the open Monday, AB Foods shares were down 1.8% at 2,855.70 pence.
By Sam Unsted; [email protected]; @SamUAtAlliance
Copyright 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
AB Foods