Associated British Foods (ABF) has blamed lower sugar prices and weak EU sales volumes for its poor sugar revenues in an interim management statement today (July 10).
The food ingredients and retail group, which also owns the clothing retailer Primark, said its sugar revenues were 20% lower in the past 16 weeks, compared to the same period last year. That’s despite there being more than 150,000t more sugar on the market.
“EU sales prices have continued to fall as a consequence of the exceptional measures taken by the European Commission to increase the availability of quota sugar in the EU,” said ABF.
Signs of stabilisation
However, it said early customer negotiations had commenced for the 2014/15 UK contract round and despite weak prices, there were signs of stabilisation.
ABF’s total revenue was 2% down year-on-year for the 40 weeks ending June 2014, it said. Cash flow benefitted from improved working capital and capital expenditure for the year-to-date was £70M higher than the same period last year, according to the company.
Grocery revenues were 5% lower than last year’s, with the majority of decline coming from the loss of contracts from its Silver Spoon sugar brand.
Overseas trade was affected by the weak pound, which hit the group’s ingredients business hardest in the last quarter. “Revenues [are] 5% lower than last year but 9% ahead at constant currency,” said ABF.
Accelerated sales growth
Primark saw accelerated sales growth of 17% for the quarter, which was driven by like-for-like growth, an increase in retail space and better sales in its new stores, it added.
“In the third quarter, the strong like-for-like sales growth benefitted from the warm weather, especially compared to the very cold months of March and April last year, and built further on strong trading in May and June last year,” said ABF.
The group has also increased its retail selling space to 929,030m² within a year and improved its operating margin through better warehouse and distribution operations, as well as lower freight rates.
ABF expected profits in retail, grocery and ingredients to be up on last year, offsetting poor sugar prices, it said.