AB Foods group revenue hit by currency headwinds

Group revenue at Associated British Foods slipped at the end of last year, although sales at Primark were a little stronger.

In a trading update for the 16 weeks to 2 January, the company said group revenue fell 2% from the same period last year, but was up 3% at constant currency.

Total sales at Primark, which is currently being rolled out across the US, were 7% higher at constant currency but up 3% at actual exchange rates due to the weakening euro against the pound.

The maker of Twinings tea said the like-for-like sales performance in the first seven weeks of the financial year was strong, benefiting from comparison with the previous year when the autumn was unseasonably warm.

In the following nine weeks, LFL sales were down due to warmer and wetter weather across Europe in the run-up to and over Christmas.

Operating profit margin in the period was lower than last year due to the stronger US dollar, but the margin reduction was lower than initially thought thanks to a solid performance from the company’s buying teams and a lower level of markdowns.

As far as sugar is concerned, AB said demand is likely to outstrip supply this year. However, with most EU contracts for the current year already agreed, there will be no material impact on the profitability of its European sugar operations until next year.

Operational performance at the group’s two beet factories at Zhangbei and Qianqi in north China was strong, with a record beet supply to both plants.

In the south, production levels were lower due to a smaller area assigned to the cane crop, excessive rain affecting and poor sugar content within the cane.

Overall, the group said currency headwinds are expected to persist, likely leading to a modest decline in adjusted operating profit and adjusted earnings for the full year.

“Investment in expansion opportunities will continue, most notably for Primark, and there is increasing evidence that our expectation of stability in sugar profit ahead of EU quota removal in 2017 will be realised,” the company said.