AB Foods profit hit by weak sugar prices, currency headwinds

Associated British Foods posted a 30% slump in pre-tax profit for the year ended 12 September as the company was hit by lower sugar prices and adverse currency moves.

The Primark owner said pre-tax profit came in at £717m, down from £1.02bn on revenue of £12.8bn, down from £12.94bn. At constant currency, revenue would have risen 2%.

ABF said a key influence on its food businesses was deflation in many of its major commodities, making growth in revenues difficult to achieve. It pointed to substantial declines in both EU and world sugar prices, as well as significant movements in exchange rates with a strengthening of sterling and the US dollar, and a weakening of the euro and emerging market currencies.

The company declared a total dividend of 35p, up 3% from last year.

Chief executive George Weston said: “We delivered a strong operational performance despite the challenges of food commodity deflation and big movements in exchange rates. The group continues to generate strong cash flows and to reduce net debt. While marginally down, our earnings per share result underlines the group's strength."

ABF said it intends to maintain investment in expansion opportunities, most notably for Primark. It said that after three years of large profit declines for AB Sugar, it expects greater stability in profit next year ahead of EU quota removal in 2017.

However, the company cautioned that substantial moves in exchange rates last year, notably the weakening of the euro and emerging market currencies, will have a significant influence on the results for the coming year.

At current rates the translation impact would be at a similar level to last year but the transactional impact would be greater and will be seen primarily in Primark and British Sugar, it said.

AB Foods said it expects the currency pressures to lead to a modest decline in adjusted operating profit and adjusted earnings for the group for the coming year.