Associated British Foods Plc reported full-year profit that beat estimates as the growth of the Primark budget-clothing chain offset a steep decline at the company’s sugar unit.
Adjusted earnings per share rose 6 per cent to 104.1 pence in the 12 months ended 13 September, the London-based company said in a statement today. The company forecast a “marginal” decline in adjusted operating profit in this financial year, weighed down by its sugar business.
The sugar industry has had to contend this year with lower prices, caused by rising imports and the impending expiration of European Union production quotas in 2017, and higher beet costs. AB Foods said it expects a further large reduction in profit at its sugar business.
The sugar division will save between £40 million and £50 million on beet costs next year, Chief Executive Officer George Weston said in a phone interview. Though prices will fall substantially in 2015, they could rise in 2016, he said.
EU sugar still costs about 40 per cent more than the world figure, “indicating the EU price may fall further,” according to Bloomberg Intelligence analysts. The shares of European competitors Suedzucker AG and Agrana Beteiligungs AG sank to their lowest since 2009 and 2010, respectively, in October.
“Sugar profitability is now well below what we would describe as a ‘normalized’ or mid-cycle level,” UBS analyst Alan Erskine said in a note to investors. UBS recommends buying Primark shares and has a 12-month target price of 3,300 pence on the shares.
Bloomberg News, edited by ESM
