Associated British Foods Plc (ABF), the U.K. sugar producer that owns Primark budget clothing stores, said first-half profit will be similar to last year as the growth of the retail business offsets falling sugar prices.
Primark sales rose 14 percent, or 4 percent at stores open at least a year, the London-based company said in a statement issued five days before the end of its financial period. Lower sugar profit means full-year earnings per share will fail to grow, the company also said, repeating a Nov. 5 forecast.
Unlike many U.K. competitors, Primark didn’t discount in the run-up to the peak Christmas period, boosting margins. The margin widened in the first half, benefiting from warehouse and distribution efficiencies, the company said.
Primark’s growth is compensating for the weakness of AB Foods’ sugar unit, which has been weighed down by price pressure caused by accelerating imports from outside the European Union.
“A reduction in EU sugar prices, ahead of regime reform in 2017, has been signalled for some time, although the speed with which the market is adjusting has been faster than anticipated,” the company said in a statement. “The world sugar price has also fallen to what we believe to be an unsustainably low level, putting further pressure on industry revenues and margins.”
AB Foods shares rose 0.9 percent to 2,993 pence on Feb. 21, the last day they were traded. They rose 56 percent last year.
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