AB Foods year earnings rise

Tue 03 Nov, 2009 09:21

By David Jones

LONDON (Reuters) - Primark owner Associated British Foods (ABF.L) beat forecasts with a 5 percent rise in full-year earnings on Tuesday driven by growth at its fashion chain and sugar but cautioned UK consumer sentiment was still subdued.

The London-based group which markets Silver Spoon sugar, Twining tea and Ovaltine drinks, said it expects to see "good" profit and sales growth this year although it added that the scale and speed of the economic recovery was uncertain.

"Our business will see reasonable to good growth but in the UK consumer sentiment will be subdued for a while," said group Chief Executive George Weston in an interview after results.

He said the group will benefit this year from its investment spending especially in sugar and at its Primark discount fashion chain and as it rebounds from the effect of low sugar prices in China and losses on edible oil hedges in the United States.

"It feels better than last January, but conditions are still very subdued," Weston added.

AB Food shares slipped 1.1 percent to 824 pence by 8:30 a.m. in line with the FTSE 100 index (UKX.L) as above forecast results were offset by the cautious outlook and the lack of upgrades by joint brokers Panmure Gordon and Credit Suisse.

Analyst Graham Jones at Panmure Gordon said strong results from sugar and a second-half recovery in grocery profits boosted results but he did not raise his earnings forecast, looking for a 4 percent rise to 60.0p for the year to September 2010.

The group, 55 percent owned by the family of Chief Executive Weston, posted adjusted earnings of 57.7 pence a share for the year to September 12 compared to a consensus forecast of 56.1p collated by Thomson Reuters I/B/E/S and last year's 54.9p.

Weston said its 191 Primark had a remarkable year with like-for-like sales growth of 7 percent, and sales were good into the current year but had been affected by warm autumn weather which had cut demand for winter coats and jumpers.

Primark opened 10 new stores in the reported year and plans 11 this year with its first Belgian store set to open in December as the group said the chain's potential in continental Europe was even more evident this year, and it was committed to further expansion in Spain and the Netherlands.

Sugar profits rose 24 percent driven by a strong performance in the European Union and Africa which helped offset the effect of low sugar prices in China, although sugar prices there had risen 25 percent so far this year, Weston said.

The group's adjusted annual pre-tax profits rose 4 percent to 655 million pound while it increased its full-year dividend by 4 percent to 21p a share.

(Reporting by David Jones; Editing by Mike Nesbit)