Associated British Foods has issued a profit warning amid falling earnings from its sugar business and pressure from a strong pound.
A fall in EU sugar prices and “weakness” in the world sugar price meant the UK company forecast “a further large reduction in profit” from AB Sugar.
ABF also predicted the strength of sterling against most of the countries in which it trades will reduce its adjusted operating profit by GBP15m (US$22.8m).
The company forecast a “marginal decline” in adjusted earnings per share for its financial year, which runs into September.
When ABF published its last set of annual results in November, it warned of a “marginal decline” in adjusted operating profit this year. The company said the impact on earnings would be “mitigated” by lower tax and finance costs but said there would be “limited opportunity to grow adjusted earnings per share in the new financial year”.
However, ABF today forecast a “decline” in adjusted operating profit despite the help from lower tax and interest charges.
It added: “Sterling’s strength against most of our major trading currencies will also have a negative effect and we now expect a marginal decline in adjusted earnings per share for the group for the full year.”
ABF said it expects growth from discount clothing arm Primark to continue, as well as see its grocery, ingredients and agriculture divisions “make further progress in operating profit on the back of their very positive performance last year”.
In an update on trading for the 16 weeks to 3 January, ABF said revenue was up 3% on a constant-currency basis, with sales at Primark growing 15%.
At actual exchange rates, group revenue was up 1%.
ABF said its grocery business was “on track to deliver further good profit growth this year”. However, the company said the performance of its George Weston Foods arm in Australia was “being held back by higher meat prices”.
Pre-market opening shares in ABF were down 3.10% to GBP30.35 at 08:01 GMT