Associated British Foods (ABF) delivered growth of 5.4% during its first quarter covering the Christmas period, with robust performance of its Grocery and Sugar divisions adding to healthy sales in its Primark retail arm.
Over the 16 weeks to 6 January, its grocery business “performed well,” with sales up 5.4% on constant currency basis to £1.41bn. ABF noted that its US-focused brands, including its Stratas joint venture in edible oils, continued their strong performances, whilst Twinings traded well across its key markets. Ovaltine delivered strong performance in Western Europe but was weaker overall as it continued to face challenges in Asia.
In Sugar, sales were up 13.0% to £825m. The group revealed that processing of UK sugar beet crop was underway and that indications to date are that sugar production will still be significantly above last year despite the recent poor weather. This is expected to bring production more broadly into line with historical production levels.
Sales in the Ingredients division were up only 0.9%, due partly to continued customer destocking. The Agriculture unit suffered a 10.8% decline, although the group noted that compound feed markets were beginning to show signs of recovery.
Meanwhile, ABF’s Primark clothing chain delivered good overall growth, with sales up 7.9% after strong Christmas trading offset a slow start to the period due to unseasonal warm weather. In the UK, like-for-like sales were up 3.8%, although there was mixed performance across Europe, with overall growth of just 1.3%
ABF concluded the trading update by stating it was continuing to trade well, with the group looking forward to a year of meaningful progress in both profitability and cash generation, with the profitability improvement being driven by a recovery in Primark margin, a marked improvement in British Sugar profitability, and by reduced losses at Vivergo.
It added: “We also feel more confident in the delivery of the Primark adjusted operating margin in this financial year, driven by a further improvement in product gross margin. This should insulate us well against potential additional costs of supply due to the disruption in the Red Sea should they arise.”
