Multinational company Associated British Foods, which also owns Primark, will take a £128m hit as it closes two sugar factories in China.
With raw materials not available at an economic price, ABF‘s sugar business, which makes up a significant sum of the group‘s near £13bn annual sales, will continue to suffer.
The news comes in a trading update in which ABF said group revenue for the 16 weeks to January 3 was 3% higher than in the same period last year when currency exchange rates were stripped out, but only 1% higher at actual rates.
ABF added that its European sugar operations are doing better with record performances from its factories and production expected to rise to 1.4m tonnes from 1.32m last year.
Discount high street clothing chain Primark however, enjoyed a stronger performance, with revenues in the 16 weeks to January 3 rising 15% at constant exchange rates, boosted by strong sales in existing stores and the expansion of its estate of shops.
In a similar fashion to other retailers, Primark‘s sales over the period were held back by an Indian summer, which slowed demand from consumers who would have otherwise spent on winter stock. As it turned colder in mid-December though, trading quickly improved.
The FTSE 100 group said that its clothing business, which represents almost 40% of ABF‘s annual revenues, had a lower operating profit margin than last year as it offered bigger discounts to clear out stock.
Like-for-like sales rose in Primark‘s UK, Irish and Iberian businesses, but the company said new stores had impacted existing outlets in the Netherlands and Germany.
Primark, which operates 287 outlets across Europe, said the sales increase had been driven by new openings and “very high sales densities” in new stores as well as an “exceptional” performance in France.
