Sterling's decline as Brexit fears grow is proving a boon to Primark-owner Associated British Foods (LON:ABF), which has nudged up its earnings guidance.
In a pre-close period trading update, the ingredients and foods group said it now expects only a marginal decline in adjusted earnings per share (EPS) for the full-year given the weakening of sterling in recent weeks, particularly against the euro.
Sterling received a further kicking in the foreign exchange markets on Monday morning as populist Tory politician Boris Johnson declared his opposition to Britain's continued membership of the European Union.
Associated British Foods said for the six months to 27 February it expects to show some year-on-year improvement in operating profit but adjusted EPS are expected to be down a tad on a year earlier.
Sales at Primark are expected to be 7.5% ahead of last year at constant currency, driven by increased retail selling space, and 4% ahead at actual exchange rates.
“Following a strong performance at the start of the financial year, trading was weaker in the weeks leading up to and over Christmas as a result of unseasonably warm weather across northern Europe,” the company revealed.
Cumulative like-for-like sales have improved since the January trading update and are expected to be level with last year in the first half after better trading during the period since then, it added.
In the Grocery division, which includes the Twinings, Ovaltine and baking brands, first half revenue and profit are expected to be on a par with the previous year in constant currency terms.
AB Sugar has performed steadily in the first half, the company said. World prices remain low but a tightening of EU and Chinese stock levels has resulted in a strengthening of domestic prices in those markets, it added.
On the Agriculture side, revenue in the first half will be lower than last year, particularly in the UK feed business, AB Connect; however, excellent trading at AB Vista drove further margin improvement for AB Agri as a whole.
Revenues in the Ingredients division in the first half are expected to be ahead of last year at constant currency but a little lower at actual exchange rates. Operating profit for the half year will again be well ahead of last year, with further recovery in yeast and bakery ingredients and another strong performance from ABF Ingredients.
Shares in Associated British Foods slightly outperformed the market in the first half hour of trading, rising 1.6% to 3,306p.