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Last Updated: Tuesday, 7 November 2006, 10:54 GMT
ABF profits dip on higher costs
Woman putting a sugar cube into a cup of tea
Changes to the EU sugar market have dissolved some profits
Associated British Foods (ABF) has seen a dip in annual profits as higher sugar and energy prices overshadowed stronger sales at its Primark clothing business.

ABF, which owns brands including Silver Spoon sugar, Kingsmill bread and, Ovaltine, said pre-tax profit fell 3% to 559m in the year to 16 September.

The decline comes despite a 7% increase in annual sales, which totalled 6bn.

ABF has been hurt by changes to the European Union's sugar pricing policy, while energy costs have surged.

In September, the company warned that higher energy bills would cost it 7m.

The firm also said its earnings were being eroded by a climb in the price of wheat, as drought affected output in some key producer nations.

Daily bread

In order to broaden its product portfolio, the company has been looking to expand its non-food business and is in the process of boosting the number of Primark stores it has across the UK.

"All the growth in the fashion business is in the discount fashion format, and we are leading that sector," said George Weston, ABF's chief executive.

"We see Primark going very well."

Sugar was seen as a difficult market going forward, and ABF warned that the decision by the EU to cut the amount of subsidies it pays to producers was likely to affect profitability.

Sugar accounts for about a fifth of ABF's profits.

However, ABF said it aimed to recoup some of the higher energy and wheat costs by increasing its bread prices.

The company's shared fell by 3.1% to 825 pence during morning trading in London.


SEE ALSO
Sugar price setback for AB Foods
11 Sep 06 |  Business
Sugar costs hit Associated Foods
19 Apr 06 |  Business
Sugar growers warned of 10% cut
05 Feb 06 |  England
Clothes retailer creates 300 jobs
02 Aug 06 |  Coventry/Warwickshire

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