Associated British Foods PLC on July 5 maintained its full-year outlook as increased sales at retail chain Primark offset a sharp decline in sugar revenue.
In a trading update for the 40 weeks ended June 23, AB Foods said group revenue was 3% ahead of the same period in fiscal 2017 at constant currency rates and 2% ahead at actual exchange rates.
AB Foods' sugar business saw revenue decline 17% in the fiscal third quarter due to "significantly" lower European Union prices that adversely affected operations in the U.K. and Spain.
The company said EU sugar prices are continuing to decline, driven by low prices globally and excess supply in the wake of very high sugar production in the bloc in 2017. Expectations for sales and profit from the sugar division have been reduced for the current and next fiscal years.
Sales at fashion chain Primark were up 6% for the fiscal year-to-date at constant currency rates and 7% at actual exchange rates. The growth was attributed to increased selling space after new stores were opened in Germany, France, Belgium, Spain, the Netherlands and the U.K.
AB Foods said better buying offset the negative effect of the U.S. dollar exchange rate on purchases, and that profit from the low-cost retailer, which accounted for more than half of AB Foods' earnings in the first fiscal half of 2018, will be higher than expected. It anticipates operating margin in the second half of the fiscal year to be "well ahead" of the 9.8% reported for the first half.
AB Foods' grocery and ingredients businesses reported revenue growth of 4% for the fiscal third quarter. Sales in the agriculture unit were up 12% year over year, driven by the effect of the larger U.K. sugar beet crop on feed volumes.
In late-morning trading in London, AB Foods shares were down 112 pence, or 4.1%, at 2,605 pence.