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Jan 14, 2010
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AB Foods enjoys Primark boost

By
Reuters
Published
Jan 14, 2010

By David Jones

LONDON (Reuters) - Primark-owner Associated British Foods (ABF.L) expects a significant boost to full-year profit after reporting very good Christmas trading at its discount fashion retailer chain and sweeter sugar trading.

Primark

AB Foods shares rose rose 2.4 percent on Thursday 14 January as brokers raised forecasts with the food maker and retailing group saying its results were ahead of its expectations and analysts saying the company was coping with the downturn better than most.

Its 196-strong Primark chain saw sales rise 19 percent in the 16 weeks to January 2, with house broker Panmure Gordon estimating a 7 percent like-for-like sales rise as consumers made their way to its doors for bargains in the downturn.

"We are aware of the downturn, but in the UK Primark had a very good Christmas," group Finance Director John Bason said in an interview after releasing its first-quarter trading update.

Bason added Primark sales were led by fashion items, accessories and footware as well as winter clothing in the recent cold weather spell across all of the country, while Spanish like-for-like sales were up above 10 percent.

Shares in the group, which is 55 percent owned by the family of Chief Executive George Weston, were up 1.7 percent at 874.5 pence by 9:51 a.m. British time after hitting a high of 882-1/2p earlier.

"AB Foods is now starting to see the return on its investments in recent years, and we believe the group is very well placed for growth going forwards," said Panmure Gordon analyst Graham Jones.

He has upgraded his earnings forecast to 63.5p from 60.0p a share previously for the year to September 2010, to show a 10 percent rise from the previous year's earnings.

The London-based group, which markets Silver Spoon sugar, Twining tea and Ovaltine drinks, said it expected good revenue growth and a significant rise in operating profit in the year to September and was confident of a good rise in earnings.

The group saw sugar revenues up 68 percent helped by high beet sugar yields in the UK, while its Chinese operations had gained from the rise of local currency sugar prices.

Last month, the group had said trading was encouraging and ahead of expectations, and analysts added that the extra update for Christmas trading had added to the group's optimism.

(Reporting by David Jones; editing by Dan Lalor and Mike Nesbit)

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