ABF Shares Rocket as Primark Sales Counters Sugar Market Weakness in Food Unit
ABF Shares Rocket as Primark Sales Counters Sugar Market Weakness in Food UnitReuters

Associated British Foods shares rocketed in the market open after the retail giant revealed that Primark clothing sales growth had offset severe sugar market weakness which has hit its food unit.

The ABF stock price rose by over 9% to 2,974.00p after the group announced its forecast for a 1% rise in first half profit for 2014.

"The group as a whole has delivered a very resilient operational and financial result at a challenging time of transition for our European sugar business," said George Weston, Chief Executive of ABF.

ABF managed to report adjusted earnings growth of 10% in the face of a strengthening of sterling and lower sugar prices after its discount clothing retailer Primark buoyed up profits.

"This was achieved with the benefit of strong performances from Primark and Grocery, an encouraging improvement at Ingredients and a lower interest charge which was, in large part, due to the group's strong cash flow," said the group in a statement.

"Revenue in the first half fell by 2% and adjusted operating profit increased by 1%. Revenue in our food businesses was lower than last year primarily because of food commodity deflation, particularly sugar.

"At constant currency, revenues were 1% ahead of last year and first half profits, when further adjusted for businesses disposed, were 3% higher. Sterling was stronger than most of our major currencies in the first half and strengthened markedly towards the end of the period."

AB Sugar was severely affected this year by the decline in sugar prices.

"The impact in the European Union is exacerbated by an intensification of competition ahead of quota abolition in 2017," said ABF.

"In this environment, AB Sugar's continued drive for efficiency improvement from the sharing of best practice around the group is all the more important. This programme is now well embedded and has delivered benefits in the period."

Primark delivered an operating profit 26% ahead of the same period last year, with an increased margin.

ABF added that it plans to open new stores in the second half of the year and will expand into the north-east of the US by 2015.