7th Sep 2020 08:49
(Alliance News) - Associated British Foods PLC on Monday said trading in the final quarter of financial 2020 "exceeded" management's expectations but earnings for the year as a whole will be below last year because of the temporary shuttering of Primark stores due to Covid-19.
Shares in the FTSE 100-listed company were up 1.6% at 2,059.00 pence each in London, though remain down 21% in 2020 to date.
"Trading in the fourth quarter in both our food businesses and Primark exceeded our expectations," the company said.
Grocery benefited from a continued rise in retail sales volumes in key markets of the US, Europe and Australia, AB Foods explained.
Increased demand for yeast and bakery ingredients, particularly across the Americas and China, delivered higher sales for the Ingredients business, while the Sugar unit, as expected, will deliver a "much improved" profit year-on-year.
"All Primark stores reopened during May, June and July and trading during the fourth-quarter has been strong. In the latest four-week UK market data for sales in all channels, Primark achieved our highest ever value and volume shares for this time of year," AB Foods added.
Adjusted operating profit for Primark, excluding exceptional charges, is now expected to be "at least at the top end" of the GBP300 million to GBP350 million range previously advised for the financial year ending September 12, down by two thirds from GBP913 million the year before.
The company however predicted a "very strong" year-on-year increase in the aggregate adjusted operating profit for Sugar, Grocery, Agriculture and Ingredients businesses, driven by increases in each division with particularly strong increases in Sugar and Grocery.
For the group as a whole, annual adjusted earnings per share will be "significantly" below last year's 137.5p, due to the sharp drop in Primark's profit and the ongoing Covid-19 impact on customer demand, AB Foods said.
Net cash before lease liabilities is expected to total around GBP1.3 billion at year-end, a significant improvement from July's "in excess of GBP750 million" cash guidance.
"The improvement since our last trading update is primarily driven by a reduction in working capital in Primark and in particular its inventory levels," AB Foods explained.
The company is slated to release its financial 2020 results on November 3.
By Tapan Panchal; [email protected]
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