AB Foods shares drop as sugar market remains challenging

Associated British Foods’ (LON:ABF) shares fell nearly 2 percent in early trading on Thursday, after a trading update showed a decline in the performance of its sugar production arm.

AB’s Sugar operations flagged in the 16 weeks to 6th January, with with revenue from continuing operations falling 12 percent behind last year at constant currency and 13 percent behind at actual exchange rates. It had been negatively affected by lower EU sugar prices, with the EU sugar regime and its subsequent sales quotas ending at the end of September, removing constraints on exports.

The group confirmed that a revenue and profit reduction greater than previously forecast is now expected for the full year due to these challenging conditions.

However, the outlook for the entire group for the year remains unchanged, with adjusted operating profit and adjusted earnings expected to be above previous forecasts.

Group revenue for the update period was 4 percent ahead of the same period last year at constant currency, with its retail arm, Primark, delivering strong results.

Sales at Primark were 7 percent ahead of those reported last year, even despite a weaker performance in Europe in the third quarter due to “unseasonably warm” weather. In the period before Christmas Primark achieved record sales, with the UK continuing to perform well and increasing its total market share.

AB Foods shares are currently trading down 1.72 percent at 2,808.00 (0825GMT).