Associated British Foods denies plans to separate Primark from grocery, sugar business

25 Feb 2014

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Associated British Foods said it had no plans to separate its premium Primark discount fashion chain from its grocery and struggling sugar businesses, even in the face of divergent performances and the absence of an overlap.

With double-digit percentage sales growth at Primark contrasting with big revenue drops from sugar, perennial speculation of a break up had resurfaced among traders and the media.

Long-serving finance chief John Bason said a separation would not happen on his watch.

He said, Primark had thrived being part of ABF, while speaking after Associated British Foods, whose grocery brands include Silver Spoon sugar and Twinings tea, published a trading update for its fiscal first half ending 1 March.

ABF continued with its earnings guidance for 2013-14 year despite highlighting the strength of sterling hurting overseas results and a weak outlook for sugar among the challenges it was facing.

Sales at Primark are expected to increase 14 per cent as against last year in the wake of "very strong" growth and further European expansion.

The increase comes on a 4-per cent rise in like-for-like sales for the six months to the end of February, as well as expansion into new stores where "sales densities" or volumes per square foot, are reportedly higher.

Figures for Primark trading as Penneys in Ireland – were published by its parent company Associated British Foods.

According to ABF, sales in the first eight weeks of the financial year were held back due to unseasonal warm weather and strong comparatives in the previous year, though the rest of the period saw excellent trading including the Christmas period.

Sales shot up even in the face of reverses like the controversial Rana Plaza factory disaster in Bangladesh in April, when 1,129 workers perished and 2,500 were injured in the collapse of the garment factory building in Dhaka.

According to London-based ABF, it was expecting its operating profit for the first half to be in line with last year as lower profit from sugar would be offset by the performance from Primark and encouraging results from grocery and ingredients divisions.

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