Surging Primark sales lift AB Foods

AB Foods, 55-percent-owned by the family of Chief Executive George Weston, said it now expected "some progress" in adjusted earnings for the year ending September 12, compared with its previous forecast for a flat outcome.

Growth was also driven by a big rise in profits at the group's sugar and agriculture business as strong performances in Europe and African sugar business Illovo more than offset losses in China.

Revenues and operating profit rose at its groceries division as well in the second half of its fiscal year, AB Foods said in a trading update ahead of full-year results on November 3.

Credit Suisse analysts raised their 2008-9 earnings per share forecast by 2 percent to 56 pence, but cut their 2009-10 projection by a similar amount to 60.8 pence to adjust for a higher tax rate.

Primark accounts for nearly a third of group profit and has branched out from Britain to open stores in Ireland, Spain, Portugal, Germany and the Netherlands.

It plans at least 10 openings in its new financial year, including its first foray into Belgium.

AB Foods said gross profit margins at the 191-store chain fell because of a rise in import costs following a fall in the value of sterling against the U.S. dollar.

However, Bason said the decline was less than 1 percent and that the worst of the pressure on margins from the recent weakness of the pound was over.

(Editing by Kate Holton and Jon Loades-Carter)