Associated British Foods PLC Trading Update (1857C)
January 15 2015 - 1:00AM
UK Regulatory
TIDMABF
RNS Number : 1857C
Associated British Foods PLC
15 January 2015
15 January 2015
Associated British Foods plc
Trading update
Associated British Foods plc today issues a trading update for
the 16 weeks to 3 January 2015. The Financial Conduct Authority has
removed the requirement for listed companies to publish interim
management statements. This trading update summarises the
significant trading developments since the last market update. The
timetable for further market updates for the 2015 financial year is
detailed on the Investors section of the Company's website.
Group revenue
Group revenue for the 16 weeks ended 3 January 2015 was 3% ahead
of the same period last year at constant currency, and was 1% ahead
at actual exchange rates.
Retail
Sales at Primark were 15% ahead of last year at constant
currency driven by increased retail selling space and very high
sales densities in stores opened during the last year, with
exceptional trading from the stores opened in France. As indicated
at the Company's annual results presentation on 4 November 2014,
like-for-like sales in the autumn were affected by the unseasonably
warm weather but trading over the last five weeks, including
Christmas, was strong. In the year to date, the UK, Ireland and
Iberia have each achieved like-for-like sales growth. Total
like-for-like sales growth for the group was held back by the
impact on existing stores of the new store openings in the
Netherlands and Germany, although total sales in northern
continental Europe were well ahead of last year. As a result of the
weakening of the euro against sterling, total Primark sales were
12% ahead of the same period last year at actual exchange rates.
Operating profit margin in the period was in line with
expectations, that is, lower than last year as a result of a higher
level of mark-down.
Retail selling space increased by 0.5 million sq ft since the
financial year end and at 3 January 2015, 287 stores were trading
from 10.7 million sq ft of retail selling space. We opened ten new
stores in the period including the relocation of the Northampton
store to much larger premises. We opened four stores in the
Netherlands, bringing our total there to 12, and three stores in
Germany including 80,000 sq ft in Dresden. We have a very strong
pipeline of new stores in Europe extending over a number of years.
We continue to expect the increase in selling space for the current
year to be less than 1.0 million sq ft including further stores or
extensions in Germany, Belgium and the UK. The extension of our
Mönchengladbach warehouse in Germany, which increased capacity by
60%, is now fully operational.
Good progress has been made in building the management team in
the US in anticipation of our launch in late 2015. We have signed
eight leases in the north east of the country, including seven from
Sears, and a lease has been signed for warehouse space located in
the Lehigh Valley area of Pennsylvania.
Sugar
EU sugar prices, as previously indicated, have been lower in the
period leading to lower revenues and margins for both the UK and
Spain, although we are now seeing some stabilisation. The European
campaigns are progressing extremely well with record factory
performances achieved. Sugar content in the beet is lower than last
year but we are benefiting from good extraction rates. UK sugar
production in the current year is now estimated to be 1.40 million
tonnes, compared with last year's 1.32 million tonnes. The Vivergo
bioethanol plant in Hull is now achieving rated output although
ethanol prices remain very weak.
Illovo has performed consistently throughout the period but cane
availability has been restricted in South Africa. Sugar prices in
Africa have remained relatively stable with the exception of
Tanzania where low-cost imports continue to hold back domestic
prices.
We have made substantial progress in developing a beet sugar
business in north China since our first investment in 2007,
particularly in the advancement of both agricultural and factory
operations. However, Heilongjiang province in the north east of the
country has proven to be the most challenging in terms of achieving
beet yields that are sufficient to provide our factories at Yi'an
and BoCheng with an adequate supply of raw material at a
competitive cost. When combined with continuing poor market prices
we have now concluded that these factories will remain uneconomic
for the foreseeable future and have therefore announced our
intention to cease sugar operations in Heilongjiang. Action will
also be taken to reduce associated overheads. The group's interim
results will include a loss on closure of businesses of some
GBP128m, reflecting the write down of assets and including one-off
cash costs of GBP18m, all of which will be excluded from adjusted
operating profit. Importantly, following this action, we expect all
of our remaining sugar factories in China to be cash generative,
even at the current low sugar prices.
Grocery
Twinings Ovaltine continues to make good progress and record
market shares have been achieved in a number of key markets
including the UK. The business is on track to deliver further good
profit growth this year. Performance in the first half at George
Weston Foods in Australia is being held back by higher meat
prices.
Ingredients and Agriculture
The recovery in Ingredients is continuing and our Agriculture
businesses have maintained the strong momentum of last year.
Currency
Sterling continues to be stronger than last year against most of
our major trading currencies, especially those in emerging markets.
A notable exception is the US dollar which has strengthened
significantly against sterling. Our estimate of the translation
impact on adjusted operating profit for the full year is a
reduction of some GBP15m.
Trading outlook
This year we expect Primark's expansion to continue and Grocery,
Ingredients and Agriculture to make further progress in operating
profit on the back of their very positive performance last year.
With the fall in EU sugar prices and weakness in the world sugar
price, we expect a further large reduction in profit from AB Sugar,
but this will put much of the effect of the structural changes in
EU prices, seen over the last three years, behind us. We expect a
decline in adjusted operating profit for the group but the impact
on earnings will be mitigated by much lower tax and interest
charges. Sterling's strength against most of our major trading
currencies will also have a negative effect and we now expect a
marginal decline in adjusted earnings per share for the group for
the full year.
For further enquiries please
contact:
Associated British Foods
John Bason, Finance Director Tel: 020 7399
Flic Howard-Allen, Head of External 6500
Affairs
Citigate Dewe Rogerson
Chris Barrie, Shabnam Bashir Tel: 020 7638
9571
Jonathan Clare
Tel: 07770 321881
This information is provided by RNS
The company news service from the London Stock Exchange
END
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