Associated British Foods PLC (LSE:ABF) reported flat profit at the half-year stage despite strong growth in sales as inflationary pressures ate into margins.
In the 24 weeks to 4 March 2023, group revenue reached £9.6bn, up 17%, but adjusted pre-tax profit at £667mln was flat when compared to last year’s £666mln.
“Inflation dominated the economic and commercial environment for all our businesses,” said chief executive George Weston.
In Food, sales increased across all businesses, up 23% to £5.3bn while Primark sales rose 19% to £4.2bn, reflecting good growth in all countries.
“We chose not to recover all the input cost inflation in Primark and actions on price in our Food businesses lagged input cost inflation as usual, and margin declined in the first half as a result,” Weston added.
In Food, the firm highlighted an exceptionally strong adjusted operating profit performance in Ingredients, up 62%.
AB Foods said sugar crop and inflationary challenges were offset by a strong Illovo performance.
At Primark, adjusted operating profit totalled £351mln with a margin of 8.3%, while the firm plans a push into the southern states of the US including a new store in Texas.
To support this, AB Foods is locating its second US distribution centre in Jacksonville Florida and construction is progressing well.
It is also restructuring its Primark business in Germany to return it to profitability as well as open new stores.
For the full year, adjusted operating profit in its Food businesses is expected to be modestly ahead of last year while Primark adjusted operating profit is also seen "broadly in line with the previous financial year".
At Primark, AB Foods said: "We expect like-for-like sales growth in the second half although we expect that growth to moderate from that in the first half."
The dividend was raised 3% to 14.2p.