AB Foods sees Primark strong but eyes commodity costs

Associated British Foods, the firm behind retailer Primark and food brands such as Twinings and Ryvita, said that group revenue rose 12% in the first 16 weeks of its accounting year.

This was helped by an "exceptional sales performance" from its Sugar and Primark divisions, which saw sales growth of 21% and 16%, respectively.

Sugar benefited from higher regional prices and expects profitability to be high in the UK on increased production.

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In the Agriculture division revenues were 22% ahead of the equivalent period of the previous year, led by K W Trident's sales of sugar beet feed and a strong performance from AB Vista, the micro-ingredients supplier for the animal feed industry.

The Grocery division was noticeably muted, up just 4% on the prior year. AB says its Twinings Ovaltine brand performed well but Kingsmill, the bread-maker, saw margins down as the competition began to bite with high levels of promotion. The Australian division, George Weston Foods, saw "difficult" trading.

In the Ingredients arm, which was just 2% ahead of the prior year, there were difficulties in the yeast and baking businesses, reflecting raw material costs and fierce competition. AB says operating profits in the division will be down in the first half of this year.

Total sales at Primark (the Retail division) were up 16% on the previous year and like-for-like sales, which compare results from stores that have been open for at least 12 months, are described as "good" although without precise figures being provided. AB does say, however, that margins were lower because of high cotton prices.

Net debt as of January 7th was £1.4bn, higher than at the same point of 2010.

AB Foods warns that economic uncertainty, particularly in the Eurozone, along with pressure on consumers' disposable incomes will remain "key features of this financial year".

The company still expects growth in sales and and operating profits, however.