Feb 27, 2017
ABF sugar arm hits sweet spot but Primark feels pinch
Associated British Foods has said it expects a "Substantial" increase in sugar profits this year compared with last, but reiterated that earnings at Primark - the clothes retailer that is its main profits motor - would come under pressure from the weak pound. ABF said first-half sales at Primark would be 11 per cent higher at constant exchange rates than in the same period last year, and 21 per cent higher at actual rates, thanks also to new store openings in the UK, Europe and the US. Like-for-like sales in the UK were 2 per cent higher than last year but flat across the whole Primark group, it added. Analysts at Barclays pointed to the recovery in ABF's sugar business after a slump in commodities prices and said of Primark: "Against a generally uncertain retail backdrop, we believe the update offers reassurance." Barclays forecasts a sixfold jump in sugar operating profits this year to £219m from £33m in 2016, and a 7 per cent fall in Primark's profits to £643m. ABF has benefited from higher world sugar prices boosted by the sale of its lossmaking cane sugar business in southern China and efficiencies introduced at Illovo Sugar since taking full control of the South Africa-based sugar operation last year. Robert Waldschmidt, analyst at Liberum, said: "In full year 2017, we expect a strong rebound in group profits as sugar profits recover and Primark continues a strong store rollout programme."
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