Associated British Foods (ABF), the owner of Primark, has warned that its profits will decline this year and that high gas prices will impact its sugar business in the next financial year. The consumer giant, which also owns grocery brands such as Twinings and Ryvita, reported that trading remained “resilient” in the latest quarter despite “challenging” retail conditions across most markets.
Revenue Growth and Profit Outlook
For the quarter ending June 20, ABF posted a 3% increase in revenue to £5.3 billion compared to the same period last year. However, the company stated that adjusted pre-tax profits for the full year will fall below the previous year's level. The group is preparing to spin off Primark by the end of 2025, breaking up one of the UK's largest consumer businesses.
Primark Performance
Primark's revenues rose 4% year-on-year to £2.92 billion, driven by new store openings. Like-for-like sales declined by 2.2%, but UK sales increased by 1% with flat like-for-like growth. CEO George Weston noted improvements in the customer proposition through new product launches, sharper pricing, and increased marketing investment. The retailer experienced a strong start to spring/summer trading in March, followed by weaker performance in April and May due to the Middle East conflict's impact on consumer sentiment and unseasonable weather. Improved weather in June helped drive stronger trading.
Grocery and Sugar Divisions
Revenues from the grocery arm, which includes Twinings and Ryvita, grew by 1% for the quarter, with growth across various brands partly offset by lower oils sales in the US. In contrast, sugar revenues fell 4%, driven by lower selling prices in Europe. ABF warned that gas costs are significantly higher due to the Middle East conflict, leading to a “further deterioration” in sugar profits next year.
CEO Statement
George Weston, CEO of ABF, commented: “In sugar, the duration and severity of the Middle East conflict have increased gas price expectations for next year, which has impacted our European profit outlook. Aside from sugar, our full year outlook for the group is unchanged. Across the group, we continued to take targeted actions and make investments to drive performance. Several long-running projects have either recently been completed or are nearing completion, reinforcing our confidence in the group’s long-term growth prospects.”
