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ABF’s grocery division, including the Twinings brand, increased revenues by 3% last year

Associated British Foods is planning further price hikes for its range of grocery brands to manage soaring inflation.

The group has already raised prices in its food business and at Primark as inflation increased annual costs by about £1bn in the year ended 17 September.

Higher prices helped group revenues jump 22% in the year to £17bn, with Primark 43% ahead of the prior year, bringing in total sales of £7.7bn as the retail operation recovered from the pandemic and customers returned to stores.

Grocery revenues from a range of brands including Jordans, Ovaltine, Twinings, Patak’s, Blue Dragon and Silver Spoon increased 3% to £3.7bn thanks to rising prices. However, adjusted operating profits fell 5% to £399m as margins came under pressure from the lag between absorbing input cost inflation and passing on rises to customers.

Sales at the embattled Allied Bakeries business, which supplies the Kingsmill brand, were ahead of last year but losses also increased as a result of significant cost rises in wheat, energy and distribution.

Revenues at the sugar division jumped 18% to £2bn, driven by higher sugar and bioethanol prices, while the ingredients business saw sales increase 19% to £1.8bn.

CEO George Weston said the group delivered strong revenue and profit growth this year, demonstrating the benefits of “diversification, brand strength and of our commitment to disciplined financing and investment”.

“The performance was achieved despite pandemic-induced disruption being followed by high and volatile input cost inflation,” he added.

He warned adjusted operating profits were expected to be lower in the new financial year as the group faced further significant input cost inflation and ongoing volatility.

“Our businesses will continue to seek to recover these higher costs in the most appropriate way,” Weston said.

“Primark has faced significant input cost inflation and sharply moving currency exchange rates. We have decided to hold prices for the new financial year at the levels already implemented and planned and to stand by our customers, rather than set pricing against these highly volatile input costs and exchange rates.

“As a result, in the current financial year, we expect significant growth in group sales from pricing in food, as well as from some pricing and from space expansion at Primark. Our outlook remains unchanged.”

ABF also announced an 8% increase in total dividends to 43.7p a share and announced its first-ever share buy-back programme of £500m.

Shares in the group have increased by 4% so far today to 1,488.5p as a result.