23rd Feb 2015 09:42
LONDON (Alliance News) - Associated British Foods PLC Monday said its still expecting a "marginal decline" in adjusted earnings per share for the full year, following lower profit in the half year to February 28, as declining profit in its sugar business and the strong pound more than offset growth from its Primark retail chain.
In a trading update, the group said its adjusted operating profit for the first half is expected to be lower than last year's GBP497 million, while adjusted first half earnings per share is expected to be in line with last year's 45.8 pence per share, largely benefiting from a lower tax rate.
"Primark has performed well and its expansion is continuing, Grocery is expected to deliver a first half operating profit in line with last year, and Ingredients and Agriculture have made excellent progress in operating profit building on their very positive performances last year. As previously indicated, profitability at AB Sugar will be substantially lower," the company said.
AB Foods said sales at its low-cost fashion retail chain Primark are expected to be some 16% ahead of last year at constant currency rates, driven by an 11% increase in new space and very high sales densities in new stores. However, at actual rates, due to the strength of sterling, sales will be up around 12%. It said its first-half operating profit margin is lower than last year, due to a higher level of mark-down.
"Total first half like-for-like sales growth for the group was held back by the unseasonably warm weather in the autumn across northern Europe and the impact, on existing stores, of new store openings in the Netherlands and Germany. However, total sales in northern continental Europe were well ahead of last year," the company said.
AB Food said the profit outlook for its sugar business for the full year remains unchanged - with profitability at AB Sugar to be "substantially lower". Its sugar unit is continuing to suffer due to a fall in EU and world sugar prices.
"Revenue in the first half will be substantially lower than last year with profitability close to break-even. The second half will benefit from performance improvement initiatives and the non-recurrence of last year's cost of restructuring the EU sugar businesses," it said.
In a statement earlier this month, AB Foods said it will write down its investment in wheat-fed bio-ethanol joint venture Vivergo Fuels Ltd, and will book an exceptional charge of GBP98 million in its first-half results as a result. The joint venture is with BP and DuPont in the UK. It has been hit by the steep fall in crude oil and bioethanol prices, and the further weakening of the euro against sterling.
The group said Monday that revenue and profit for its Grocery business in the first half of the year are expected to be "close to last year" at both constant currency and at actual exchange rates. It said revenue from its Ingredients division is expected to be ahead of last year at constant currency and broadly the same as last year at actual rates, with an operating profit "well ahead" of last year. It said its seen a good recovery in yeast and bakery ingredients and a stronger performance from ABF Ingredients.
AB Foods said it will release its first-half results on April 21.
The group's shares were trading 0.7% higher Monday morning at 3,057.00 pence.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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