ABF forecasts sweeter grocery profits, Primark racks up clothing sales

It's a mixed bag for the Primark and Kingsmill owner. Primark sales are up, but its grocery business is stagnant.

by Elizabeth Anderson
Last Updated: 04 Jun 2013
As the high street struggles with weak consumer spending, it’s a different story at budget clothing chain Primark. Sales are expected to be 23% up on the same time last year. And that should boost profits at Associated British Food, the parent company of Primark, which last year made a £412m profit in the six months to March.

The FTSE 100 company, giving the markets a taster before its official half year results are revealed in April, said there had been very strong like-for-like sales growth and increased retail selling space.  Primark currently has 257 stores and 8.9 million sq ft of selling space, mainly in the UK. It recently opened another store on London’s Oxford Street. Primark also benefitted from falling cotton prices.

However, ABF’s grocery business isn’t performing as well. AB Foods, which owns brands including Ryvita, Twinings and Kingsmill, said revenue will be much the same as last year. However, operating profit was boosted by production efficiencies at the new Twinings tea factory in Poland and cost reduction initiatives in the Ovaltine plant in Switzerland. Like many other bread manufacturers, it’s been suffering with the worst UK harvest of recent years, which has resulted in low volumes of wheat.

Profit from Sugar in the first half will be lower than last year, ABF predicts. Poor growing conditions last year resulted in less sugar being made and ABF also faced a £22m charge after mothballing two small Chinese beet factories.

Will Primark’s performance be enough to compensate for the poorer performance in the rest of the business? The markets will decide when official figures are out in April.

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