Associated British Foods Plc, the refiner of Silver Spoon sugar and owner of Primark stores, warned its second half earnings will fall due to lower profits from sugar and breadmaking, and soaring energy costs.
The London based foods group, 55 percent owned by Chief Executive George Weston's family, confirmed its forecast for an earnings fall given back in April, but countered by saying its Primark stores traded well and sugar growth is set to resume.
Finance director John Bason reiterated on Monday that the fall in earnings will be in line with the group's expectations as it gave a trading statement towards the end of its financial year on Sept 16. and ahead of annual results due on Nov 7.
Primark is going like a train, while we are confirming our outlook for sugar, Bason said in an interview.
Analysts said they are unlikely to change their year pretax profit forecasts of 540 million to 550 million pounds after it reported 590 million pounds the previous year.
AB Foods shares dipped 0.4 percent to 816 pence by 8:40 a.m. in a lower London market.
They fell to a year low of 695 1/2p in mid June before recovering, but have underperformed the blue chip FTSE 100 Index
by 5 percent so far this year.
The company, which makes a fifth of its profits from sugar, expects a fall in sugar profits due to lower European Union prices ahead of reform of the EU sugar regime.
Although sugar earnings will again be down in the year to September 2007, the following year should show growth, Bason said.
It has reacted to the price cuts by planning to close two of its six British Sugar beet plants next year, partnering Du Pont and BP to develop biofuels and buying 51 percent of Africa's biggest cane sugar producer Illovo, and so will see half its sugar next year coming from outside the EU.
Its Primark discount clothing stores, which earn around 30 percent of group profits, showed like for like sales up 3 percent for the year, but flat like for like sales in the second half after a strong 12 percent rise the previous second half.
Bason added the conversion of former Littlewoods stores was on schedule and the group, with its first store in Spain, will have opened 20 new stores in the second half, giving a total of 143 outlets by its financial year end.
There are 23 more Littlewoods to convert, most by Christmas and all by early 2007.
We are opening around one a week at the moment with our Oxford Street store opening in early 2007, Bason said.
The maker of Ovaltine beverages, Twinings tea and Ryvita crispbread said its bread bakery business suffered from lower volumes of Kingsmill and own label products but has launched new products such as a crustless loaf this summer to revive sales.
Bason expects energy costs to be around 7 million pounds higher than the previous second half, in line with the rise seen in the first half of the year.