AB Foods Sees Sales, Profit Gaining Amid Consumer Pressures

Associated British Foods Plc (ABF), the owner of the Primark discount-clothing chain and maker of Silver Spoon sugar, said it expects sales and earnings to rise this year amid ongoing pressure on consumer income.

Adjusted operating profit rose 1 percent to 920 million pounds ($1.5 billion) in the 52 weeks ended Sept. 17, the London-based company said in a statement today. It had forecast similar results to the 909 million pounds reported on the same basis last year over 53 weeks of business.

“We expect continued pressure on consumer disposable incomes,” Chief Executive Officer George Weston said in the statement. “However, commodity costs appear to be subsiding although the effect of forward purchasing means that the benefit to the group will not be felt immediately.”

The company, which also sells Twinings tea products and Kingsmill bread, forecast sales and adjusted operating profit to rise this fiscal year, with earnings growth weighted to the second half.

Sales at the company’s Primark stores open more than a year rose 3 percent, in line with the company’s forecast. Adjusted operating margin, a measure of profitability, slid to 10.2 percent from 12.5 percent at the unit due to rising costs of materials and an increase in value-added tax this year in the U.K. The company gets the about a third of its operating profit from the division.

Beet Sugar

AB Foods, which controls Illovo Sugar Ltd., the largest maker of the commodity in Africa, said profit rose at its sugar unit as it sold more beet sugar in China and prices for the commodity increased.

AB Foods has slid 5.8 percent this year in London trading as heavy frosts cut the amount of sugar it produced in the U.K. and the costs of making its goods, including cotton for clothing, increased, constraining profitability.

“ABF has certainly struggled in 2011, although in our view, this is already well-understood such that guidance and tone for 2012 is probably more important at this point,” Andrew Wood, an analyst at Sanford C. Bernstein, wrote in a note published before the results.

To contact the reporter on this story: Clementine Fletcher in London cfletcher5@bloomberg.net.

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net.

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