AB Foods sees tough trading ahead

Adverse weather affected sugar crops

Associated British Foods saw half yearly profits rise by 5% but warned of continued tough trading conditions.

The owner of clothes retailer Primark and the Silver Spoon sugar brand saw pretax profits of £282m in the period to 1 March, from £262m a year earlier.

Primark saw like-for-like sales growth of 4% during the half year.

The firm said the latest results were "on track" but added that uncertainty lay ahead as energy and commodity prices were on the rise.

Shares in the firm fell on the news, and ended down 2.13% at 871 pence as the result of worse-than-forecast profit margins.

"Although we are seeing improved operating performance from ABF in the first half of 2008, we expect the stock to react negatively to the margin development, which came in well below expectations," Andrew Wood, an analyst at Sanford Bernstein wrote in a note.

The firm said sugar profits from the EU operations "suffered from the well-documented impact of regime reform and adverse weather prevented the realisation of the full potential of the crop".

The EU has changed rules regarding sugar subsidies and quotas for sugar production allocated to EU states.