Associated British Foods has insisted the performance of its grocery arm is improving, despite continued challenges in its bakery segment.
For the 16 weeks to 2 January, ABF said it had seen “further margin progress” from its grocery division. Hot beverage business Twinings Ovaltine achieved strong sales growth in Australia and an improvement in Thailand. Trading at George Weston Foods in Australia was “much improved” with a better performance from the Don KRC meat business.
The Kingsmill owner said it had seen a “substantial” sales volume increase in its Allied Bakeries business in the UK but pricing and margins remain challenging. In its last trading update lower prices in its bakery division did lead to a reduction in profitability from the unit.
For ABF as a whole, the company’s top line was dampened by the strength of sterling. Sales fell 2%. On a constant-currency basis, sales rose 3%.
Foreign exchange has notably affected margins at ABF’s British Sugar unit and its clothing retail business Primark. As a consequence, ABF forecast its annual adjusted operating profit will fall GBP25m (US$36m) and predicted it will see a “modest decline” in adjusted earnings.