Associated British Foods has blamed volatile vegetable oil prices for a "disappointing" performance at its grocery division – although the Kingsmill baker still saw overall sales rise by almost a fifth (18%) for the past six months.
Associated today announced a 2% fall in adjusted pre-tax profits to £275m for the 24 weeks to 28 February, as group sales rose 18% to £4.374bn.
The manufacturing giant reported strong growth from its sugar and agriculture division and its ingredients arm, while its Primark clothing business also posted a strong performance as operating profits rose 10% to £122m and like-for-like sales were up 5%.
Operating profit for the sugar business rose to £70m from last year’s mark of £58m, thanks to strong progress from its European businesses and the Illovo brand.
The group said its Allied Bakeries subsidiary, which includes Kingsmill bread, “continued to trade well, with good growth in branded volumes and a further improvement in profit”.
Although Twinings, Ovaltine and its UK bakeries performed in line with expectations, the group said the performance of its grocery arm was “as a whole disappointing” – in part due to rapidly changing vegetable oil prices in the US.
“This is a reassuring set of results achieved in a difficult economic environment,” said Associated chief executive George Weston. “Strong profit growth was delivered by sugar and Primark but grocery was adversely affected by high-priced contracts in US corn oil.”
He added: “Good progress was made with the capital investment programme, which will be a major contributor to our future growth.”