Strong Christmas period for ABF as inflation continues to bite

Associated British Foods (ABF) has posted robust trading figures for the 16 weeks ended 7 January across both its food business and Primark retail chain. The group noted that it still faced “significant” cost pressures but also saw a less volatile inflationary environment, easing commodity costs and “resilient” consumer spending.

Group revenue over the period climbed 16 per cent on a constant currency basis to £6.7bn. However, ABF said its outlook for the full year was unchanged with it expecting adjusted operating profit to be down on the 2021-22 figure of £1.4bn due to pressure on margins.

Aggregate revenue across all its food businesses was up 17 per cent to £3.55bn. The group stated that the increase was primarily driven by price increases to recover input cost inflation in its Grocery, Ingredients and Agriculture businesses, while a 27 per cent jump in Sugar revenues reflected higher sugar and co-product prices in Europe and Africa.

Whilst cost inflation pressures are easing, ABF noted that it was having to work hard to restore margins which have been and remain under pressure.

In its grocery unit, sales rose 9 per cent to £1.39bn. The group said that inflation in input costs continued to run ahead of pricing to recover margins, and for the full year it still expects some erosion of adjusted operating profit margin.

Meanwhile, ABF’s Primark business saw “good” trading in all markets, with a “very strong” Christmas period. Sales rose 15 per cent to £3.15bn, with footfall said to be strong in both the UK and the Eurozone, driving volume growth.

The group revealed that early trading at Primark in the new year had been “encouraging”, but it highlighted that macro-economic headwinds remain and may weigh on consumer spending in the months ahead. ABF had accelerated its programme of store openings in the period and remains on track to add a net 1 million sq. ft. of retail selling space in this financial year.