Associated British Foods PLC (LON:ABF) said it has higher expectations for final quarter sales following an encouraging performance by Primark since stores reopened.
The FTSE 100 group raised its full-year sales and adjusted operating profit expectations, stated before repayment of government money received under the furlough scheme.
READ: AB Foods stays cautious on outlook but analysts are bullish on Primark prospects
It means that adjusted operating profit for the group is now in line with last year.
In the quarter to 19 June, group sales soared 47% to £3.6bn, with retail up 207%, sugar up 21%, agriculture and ingredients up 10% and 3% respectively, while grocery dipped 3%.
Sales in this quarter were 6% higher than in the same pre-pandemic period two years ago.
Primark revenues reached £1.6bn in the third quarter with the reopening of all stores and the opening of seven new stores.
They were well above last year’s third-quarter sales of £600mln and 3% higher than the same period in 2019.
AB Foods noted that volatility remains high and performance varied by region depending on the degree of restrictions related to Coronavirus (COVID-19). Data for the total UK clothing market, which includes online sales, for the seven-week period after reopening shows both volume and value share gains for Primark on a two-year basis.
Group cash generation in the quarter was both ahead of expectation and much stronger than in prior years, the firm said, as net cash before lease liabilities for the group increased from £705mln at the beginning of the quarter to over £1.45bn at the end of the quarter.
This improvement was mostly delivered by recovery in Primark sales along with a reduction in the inventories which had built up during lockdown.
Assuming that no Primark stores are closed in the remainder of this financial year, the excess inventory at the end of lockdown should return to more normal levels by the financial year end. Net cash before lease liabilities for the group is expected to be above £1.7bn by then.
Sugar revenues in the quarter were significantly ahead, driven by strong volumes in Illovo and China and higher prices in Europe and Africa, with full-year adjusted operating profit at the segment estimated to be higher.
Grocery, instead, is expected to see a dip in profits due to lower margins at ACH.