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AB Foods expects first-half profit to be in line with last year, held back by fall in sugar revenues

The group said Primark's half-year total sales were expected to be up 7% at constant currency rates, with like-for-like sales down 1% over the first-half but up 1% in the second quarter

Primark store
For the full-year, AB Food said its outlook was unchanged with "progress" expected in both adjusted operating profit and adjusted EPS

Associated British Foods plc (LON:ABF) shares gained on Monday as it said it expects its first-half profit to be in line with the same period last year despite being held back by a previously flagged reduction in sugar revenues.

In a trading update, the FTSE 100-listed conglomerate - which owns the Primark clothing retail chain as well as major grocery, agriculture and ingredients businesses - added that lower finance expenses and a lower effective tax rate would see adjusted earnings per share rise for the first half to March 3.

READ: AB Foods delivers mixed Christmas trading with Primark lifting sales

For the full-year, AB Food said its outlook was unchanged with "progress" expected in both adjusted operating profit and adjusted EPS.

The group said Primark's half-year total sales were expected to be up 7% at constant currency rates, with like-for-like sales down 1% over the first-half but up 1% in the second quarter.

As already indicated, it said it expects margin in the second half for Primark to be higher than that in the same period last year.

In its grocery business, AB Foods said revenue in the first half is expected to be ahead of last year at constant currency and, with progress in margin, operating profit will be well ahead driven by Twinings Ovaltine.

But the firm added that AB Sugar's revenue and profit is expected to be down on last year, in line with previous guidance, primarily as a result of significantly lower EU prices which are adversely affecting our UK and Spanish businesses.

In mid-morning trading, AB Foods shares were 1.7% higher at 2,689p.

"Solid 1H trading", says Liberum

In a note to clients, analysts at Liberum Capital reiterated a ‘buy’ rating and 3,500p on AB Foods shares.

They said: “Solid 1H trading, FY18 guidance reiterated despite a reduction in Sugar revenues driven by all other businesses”.

The analysts added: “ABF offers compelling exposure to secular growth trends in retail over the next 5-10 years. We estimate Primark can double sales and profits over the next 5 years.”

  -- Adds share price, broker comment --

Quick facts: Associated British Foods PLC

Price: 2538 GBX

LSE:ABF
Market: LSE
Market Cap: £20.09 billion
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