Associated British Foods (ABF) raised its full-year profit guidance on the back of price rises, and reiterated its expectation that retail and sugar profitability will significantly improve in 2024.
The Primark owner said operating profits for the year to 16 September would be “slightly better than previous expectations” despite retail footfall being hit by poor weather conditions in its fourth quarter. Adjusted operating profit was £1.4bn in the 2022 financial year.
Primark's performance is being helped by price increases, lower freight and material costs, and a weaker US dollar, with retail like-for-like sales growth coming in at 9 per cent for the year, taking revenue to £9bn. Further store openings have taken the estate to around 430 sites. But the retail operating margin, expected to come in at around 8 per cent, has been impacted by “higher-than-expected stock loss from stores across the estate and a modest amount of German restructuring costs”.
Management pointed to “strong sales growth” in the food division, with grocery trading ahead of company expectations as brands in the US put in a solid shift. Sugar is expected to make a "substantial improvement in profitability" next year, aided by an improved sugar beet crop in the UK.
Analysts at investment bank Shore Capital raised their earnings per share forecast for 2024 by 8 per cent to 165p and argued that ABF is undervalued, "especially in a higher base rate environment".
The full-year results are scheduled for release on 7 November.
