Shares in Associated British Foods tumbled in morning trade today (27 April) after the Kingsmill maker cut its full-year profit outlook despite an improved first-half performance from its sugar and grocery businesses.
The company, which had predicted a rise in full-year earnings, said that price competition and higher cotton prices were hitting its Primark discount fashion business. As a consequence, ABF said that profits are “now expected to be similar to last year’s”.
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The group revealed that first-half operating profit rose 6% to GBP356m (US$589.9m) while revenues incresed 9% to GBP5.21bn in the six months to 5 March. However, profit before tax remained level at GBP319m and basic earnings per share were down 3% to 30.6p.
Commenting on the result, CEO George Weston hailed the company’s “good growth” during the period.
“The breadth, diversity and resilience of our businesses have enabled the group to deliver good growth. We have made further substantial capital investment for the longer-term development of the group,” he said.
ABF’s sugar division booked a significant jump in profit, which was up 27% to GBP108m, driven by the performance of its Chinese and Spanish sugar interests.
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By GlobalDataMeanwhile, the company’s UK grocery unit saw profit rise 17% to GBP111m on sales gains of 8%.
Grocery revenues were driven by investments in product development and marketing behind the Kingsmill, Ryvita and Jordans brands, the company said. Profitability at the business is also improving thanks to “substantial investment” in the UK grocery businesses to upgrade production, ABF said.
Shares in the group fell 6.79% to 974 pence at 10:37 BST.
Click here for the full release from ABF, or check back later for just-food’s more in-depth insight into the group’s results.
