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AB Foods: Primark star of show again as sugar weighs

Last updated: 09:07 24 Feb 2014 GMT, First published: 10:07 24 Feb 2014 GMT

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An excellent performance from budget fashion store Primark will help Associated British Foods (LON:ABF) offset much lower profit from its sugar business.

The firm is due to report on its latest half year, to March 1, at the end of April but on Monday gave a pre-close update.

"Adjusted operating profit for the first half is expected to be in line with last year.  A much lower profit from Sugar will be offset by another excellent performance from Primark and encouraging results from Grocery and Ingredients," the company said.

At Primark, first half sales have been very strong, the firm revealed, and are expected to be 13% ahead of the same period last year at constant currency and, with the benefit of a stronger euro in this period, 14% ahead at actual rates.  

This has been driven by 4% like-for-like sales growth, an increase in retail selling space and superior sales densities in the larger new stores.

Operating profit margin is now expected to be higher than in the same period last year, benefiting from warehouse and distribution efficiencies and lower freight rates, while Christmas trading was strong in both years, the group said.

Meanwhile, at Sugar, revenue and profit in the first half will be "substantially" lower than last year.

A reduction in EU sugar prices, ahead of regime reform in 2017, has been signalled for some time, though the speed with which the market is adjusting has been faster than anticipated, the firm said, adding that the world sugar price had also fallen to what it believes is an unsustainably low level, putting further pressure on industry revenues and margins.

Associated British Foods shares dipped3.01% to 2,903p.

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