East Anglia: ABF profits climb as growth at Primark offsets lower revenues for sugar business
PUBLISHED: 10:26 23 April 2014 | UPDATED: 17:09 23 April 2014
A fall in sugar prices around the globe has contributed to a 2% decline in first half revenues for Associated British Foods.
But pre-tax profits across the group still rose by 6% in the 24 weeks to March 1, with its budget fashion arm Primark again a star performer.
Group pre-tax profits came in at £434million overall, on turnover of £6.206billion, and at £468m on an adjusted basis, representing underlying growth of 4% compared with last year’s first half.
Operating profits within the group’s sugar division, which includes the British Sugar beet processing business in East Anglia, were sharply down, at £64m against £162m in last year’s first half, on revenues 22% lower at £1.027bn against £1.323bn last time.
ABF said the decline was driven by a combination of substantially lower sugar prices and lower volumes in all markets, with the fall in profits even more pronounced taking into account a £22m charge included in last year’s figures for the mothballing of two factories in China.
In the UK, however, the group said favourable growing conditions through the mild winter had resulted in the crop continuing to grow into the new calendar year, with good beet quality and high sugar content.
“All factories operated very well and sugar production is estimated to be 1.32m tonnes, a record for the period since regime reform in 2006, and compares with last year’s 1.15m tonnes,” it added.
Sales at Primark grew by 14% to £2.3bn, with operating profits 26% higher at £298m, assisted by increased selling space in a number of major cities with the opening of a second store in London’s Oxford Street and extensions to shops in Newcastle and Manchester.
Three new UK stores are due to follow in the second half, including a relocation in Cardiff, and having already opened its first stores in France, in Marseille and Dijon, Primark now plans to make its debut in the United States market with a store due to open in Boston, Massachusetts, towards the end of next year.
Revenues in the group’s agriculture division fell from £641m to £625m and operating profits dipped from £20m to £19m, with lower feed revenues in the UK − largely reflecting a fall in raw material commodity prices − partly offset by growth in China and, South America, Asia Pacific and North America.
Operating profits in the group’s grocery division, which includes Silver Spoon sugar as well as other brands such as Twinings, Ovaltine, Kingsmill, Ryvita and Jordans , rose by 31% from £96m to £126m despite a fall in reported revenue from £1.832bn to £1.767bn.
ABF said that, adjusted for currency movements, grocery revenues were 2% ahead of last year’s first half, with currency factors having little net effect on operating profit.
Twinings and Ovaltine again performed well, with strong sales growth for tea, particularly in the US, Kingsmill bread continued to lead progress for the Allied Bakers business, despite a “highly competitive” UK market, and Jordans and Ryvita also both achieve further growth in sales and market share.
There was a similar picture in the group’s ingredients division, where turnover was 3% lower, at £509m against £527m, at actual exchange rates but 4% up when adjusted for currency movements. Operating profits came in at £15m, against a break-even performance last year.