Associated British Foods (ABF) saw revenue in its Grocery division increase by just 1% during the 16 weeks to 4 January, after good growth in its international operations, driven by Twinings and Ovaltine, was offset by declines in certain US and UK-focused brands.
The weakness in the UK was primarily due to lower volumes and sales in its Allied Bakeries business. Meanwhile, its US brands were said to have performed in line with expectations after the segment faced headwinds due to the normalisation of consumer oils sales.
Sales in ABF’s sugar division declined 2% as growth in Africa was offset by a fall in European sugar prices, which hit sales in the UK and Spain. Sales in the group’s ingredients division grew 4%, driven by its yeast and bakery business AB Mauri.
ABF’s retail arm, Primark, reported a 2% increase in sales, driven by growth in Spain, Portugal, France, Italy, Central and Eastern Europe, and the US. However, sales in the UK and Ireland declined in the period, with growth over the key Christmas period offset by weaker autumn trading in a “challenging retail environment” as mild weather and low consumer confidence hit demand.
ABF’s share price fell over 2% following the trading update but James Grzinic, an analyst at Jefferies, said there was some relief that there was no cut in profit margins at Primark amid hefty discounting in the UK clothing market.
ABF stated that it expected to hold profit margins as “good cost management offsets inflation”, adding: “Despite the market conditions in the UK and Ireland, we remain confident in the Primark proposition and continue to focus on initiatives across product, digital and brand to drive underlying growth.”
For its other divisions, ABF noted that there was no change to the guidance it provided in November last year.
