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Associated British Foods’ share price rose on Tuesday following the release of reassuring full-year trading numbers. At £14.60 per share it was last 2% higher on the day.

ABF — a supplier of foods and ingredients and owner of the Primark budget fashion chain — said that revenues rose 22% in the 12 months to September. Sales came in at a shade below £17 billion for the period.

As a result, adjusted pre-tax profit soared 49% year-on-year, to £1.36 billion. Adjusted operating profit was up 42% at £1.44 billion.

Profits Rise Across The Board

High sugar prices helped drive revenues at ABF’s Sugar division 22% higher last year, while turnover at its Ingredients division increased 21% following the end of Covid-19 lockdowns.

Price increases on popular food brands like Jordans breakfast cereals and Silver Spoon sugar helped revenues at its Grocery division rise 4% in financial 2022. Meanwhile, higher feed prices pushed sales at its Agriculture division 12% higher.

Primark Shines Again

But once again Association British Foods’ Retail division stole the show. Revenues here leapt 38% year on year to £7.7 billion. This was due to “a significant increase in customer footfall and sales densities as markets emerged from pandemic,” the firm said.

Adjusted operating profit margins at Primark improved to 9.8% last year from 7.4% previously. This helped adjusted operating profit leap 136% year on year to £756 million.

Primark now accounts for 53% of group operating profit.

In the UK, like-for-like sales and market share at its retail operations are “now broadly in line with pre-Covid levels,” ABF said. But it added that cautious customer sentiment in Continental Europe means like-for-like sales there were down from a year earlier.

Retail Prices To Be Frozen

Its strong full-year results results encouraged ABF to launch a share buyback programme of £500m. It also elected to raise the full-year dividend 8% to 43.7p per share.


For the current year and beyond, chief executive George Weston commented that “substantial and volatile input cost inflation will be the most significant challenge in the new financial year, and our businesses will continue to seek to recover these higher costs in the most appropriate way.”

Weston said that its Primark division is facing “significant input cost inflation and sharply moving currency exchange rates.” But he added that the company plans to hold product prices stable through to the end of next summer.

As a consequence ABF said that “we expect Primark’s adjusted operating profit margin for next year to be lower than 8%.” It added that “we remain focused on returning to an adjusted operating profit margin of some 10% as commodity prices moderate and consumer confidence improves.”

What The Analysts Said

Neil Shah, director of content and strategy at Edison Group, said that ABF “faces significant challenges around input cost inflation.”

He said that Primark’s business model “will come under increasing stress as the group attempts to avoid raising prices where possible whilst combating rising input costs and a difficult macroeconomic environment.”

Shah added that “it will be difficult for the group to avoid the impact which the cost-of-living crisis will have on sector for the foreseeable future.”

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, stated that keeping prices steady “is an integral part of the group’s ability to keep customers coming through the doors.”

She noted that “without being the affordable name on the high street, Primark loses almost all its bargaining power… [it] is well aware that pushing prices too far will do nothing but alienate its core customers.”

Speaking about ABF as a whole, Lund-Yates said that “the eclectic mix of food and ingredients businesses offer a level of diversification other high street giants can only dream of. While the cost landscape for these divisions is tricky too, as a longer term source of cushioning, they’re not to be knocked.”


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