A strong performance from its sugar business has helped propel first-half sales and profits growth at Associated British Foods (ABF).

The company said in a trading update this morning (27 February) that it expects first-half adjusted operating profit and EPS to be slightly up on last year’s levels.

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For the six-month period, the group said that profit from its sugar division will be “substantially” better than last year, with strong gains in the UK and an improved performance from its Spanish operations offsetting a drop in profits in China.

However, ABF cautioned that at its grocery business, which includes brands such as Kingsmill bread and Jordans cereal, profit will be “substantially” lower than last year, despite higher revenues. This is driven by the cost of restructuring at George Weston Foods in Australia and margin declines at Allied Bakeries in the UK, the company said.

Likewise, profitability at ABF’s ingredients segment is expected to trail revenue growth due to higher raw materials costs and a competitive trading environment, the group revealed. 

ABF aims to raise US$526m through private placement of senior notes to a number of UK and US institutional lenders in late March. Proceeds will be used to refinance debt maturing next year, diversifying its sources of funding and lengthening its debt maturity profile.

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The group’s retail division, Primark, will see 15% sales growth on store openings and strong Christmas sales. While ABF said that margins would be down during the period due to higher input costs, the group added that it expects margin pressure to decrease in the back-end of the year.

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