16th Jan 2014 10:46
LONDON (Alliance News) - Food producer and clothing retailer Associated British Foods PLC Thursday reported another stellar performance from its low-cost fashion fashion retailer Primark for the first quarter, with sales up 14%.
But ABF warned that its sugar business was weaker than expected, and it now expects an even bigger fall in profits for the year from the division.
ABF reported flat revenues at actual exchange rates for the first quarter ended January 4, and 1% growth at constant rates.
ABF was hit hard last year by falling sugar prices, which tumbled to multi-year lows last week. The commodity markets have been reacting to an EU regulatory change, with the end of EU sugar quotas in 2017. As a result, ABF has lowered expectations for profits for its sugar business this year several times and now expects an even bigger decline.
"With the further recent fall in world sugar prices, this reduction will now be greater than previously expected," the group said in its statement Thursday.
The group's retail business Primark has kept overall group sales afloat, and it said it now expects Primark's profit to be well ahead of last year, with a higher margin than expected.
The group said that it continues to expect adjusted earnings per share for the current financial year to be similar to the previous financial year, given the current strength of the sterling, combined with revenue growth and margin improvement in grocery, as well as a lower interest charge.
Primark reported sales growth of 14% at actual exchange rates for the 16 week period ended January 4, and 12% at constant rates. ABF said sales were driven by an 8% increase in selling space, strong like-for-like growth, and higher sales densities from new stores. It said that sales will be further boosted by more store expansion planned for the remainder of the year
"Although like-for-like sales in the first eight weeks were held back by the unseasonably warm weather and the strong comparatives in the previous year, the second half of the period was characterised by excellent Christmas trading with very strong like-for-like growth," ABF said.
The group opened its first Primark store in France in December,and it said it was one of its best store openings to date.
Sugar revenues, on the other hand, declined by a 28% at actual exchange rates for the period, and by 27% at constant rates.
"EU sugar prices, as previously indicated, were lower in the period which will lead to lower revenues and margins for both the UK and Spain in the full year," ABF said in its trading update.
ABF said that the further recent fall in world sugar prices may put even more pressure on revenues and margins, particularly in China.
The group said that revenue from its agriculture business was level with last year at both constant currency and actual rates.
It said that lower UK feed volumes were offset by growth in China and by a strong performance at AB Vista, where Quantum Blue in South America and Econase in Asia were the main contributors. It said that Frontier traded at similar levels to last year, with good sales of crop inputs and fertilisers.
ABF's grocery business reported revenue growth of 2% at constant currency for the period, but at actual rates declined 1%, largely due to a weaker Australian dollar.
ABF Ingredients saw revenues growth of 3% at constant currency rates, but a fall of 2% at actual rates. It said that in yeast and bakery ingredients, cost inflation in South America was successfully recovered with the improvement in volumes and margins in Brazil, while revenues in North America were driven by increased volumes. It said that its profit at AB Mauri is improving.
ABF shares were trading at 2,578.10 pence per share Thursday morning, down 4.4%.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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