ABF grocery profits jump despite soft sales
Grocery improves but sugar continues to weigh at ABF
Associated British Foods said today (4 November) that full-year profits from its grocery division jumped by one-fifth, despite a dip in underlying sales during the period.
In the 12 months, adjusted operating profit rose to GBP269m at ABF's grocery unit, up 20% compared to GBP224m (US$430.5m) in 2013. Excluding the impact of currency exchange, operating profit climbed 24%, the company added.
The company reported stronger adjusted operating margin, which expanded to 8.1% from 6.3%.
ABF said: "George Weston Foods in Australia, ACH Foods in the US and Twinings Ovaltine all well ahead of last year." Allied Bakeries, ABF's UK bread arm, Ryvita and Jordans also saw profits ahead of last year, boosted by branded sales.
However, grocery revenue was down 6%, dropping to GBP3.3bn. Excluding the drag of currency exchange, revenue was down 1%.
On a group-wide basis, the firm, which has interests spanning sugar and ingredients to retail, reported revenue fell to GBP12.9bn from GBP13.3bn. Operating profit was flat at GBP1.08bn while net profit rose to GBP783m from GBP628m on lower financing costs.
According to analysts at Shore Capital, the group result was boosted by "excellence" at the Primark discount clothing arm. The analysts also noted the "very encouraging" improved performance from grocery contributed to the bottom line.
Elsewhere, lower selling prices, falling volumes and the negative impact of currency exchange at the group's sugar business meant that the unit weighed on ABF's overall performance. The company warned for 2015 a "further large reduction" in sugar profit will lead to a "marginal decline" in EBIT. However, the impact on next year's net profit is expected to be offset by lower tax and finance costs.
Shares in the group edged up 1.54% in early trade today, climbing to GBP27.14 at 10.30 GMT.
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