Associated British Foods (AB Foods) has reported revenues of £6.9bn in its latest trading update, a total up 2.8%, or by 5.4% at constant currencies.

The group’s latest update covers the trading period for the 16 weeks to 6 January.

The food processing and retailing giant stated that its grocery business had “performed well”, with its Twinings brand trading well across the group’s key markets.

In sugar, the group has reported that processing of the UK sugar beet crop is under way and the indications are that sugar production will still be “significantly above last year”, despite the recent weather.

The group’s Vivergo brand had a mixed period of trading but was overall much better than last year. Illovo, its sugar business in southern Africa, also had a mixed period with a combination of production and currency challenges.

AB Foods also owns clothes retailer Primark and reported that its Primark trading was “good overall”, with sales up 7.9% for the period which was marked by a slow start due to unseasonal warm weather, and strong Christmas trading. Like-for-like sales grew by 2.1%, driven by higher average selling prices.

A statement from AB Foods said: “We continue to look forward to a year of meaningful progress in both profitability and cash generation, with the profitability improvement being driven by a recovery in Primark margin, a marked improvement in British Sugar profitability, and by reduced losses at Vivergo.

“We also feel more confident in the delivery of the Primark adjusted operating margin in this financial year, driven by a further improvement in product gross margin. This should insulate us well against potential additional costs of supply due to the disruption in the Red Sea should they arise.”

Head of markets at interactive investor, Richard Hunter, commented that Primark remains the “engine of growth” for AB Foods, with its value offerings “still hitting the spot” with consumers.

“Revenues excluding currency effects grew by 7.9%, with Primark now representing 49% of group sales. At the same time, selective price rises also provided some margin protection, and in terms of outlook, the group is maintaining its projection for adjusted operating margin in excess of 10%, with the potential for more should this rate of growth be maintained.”

Hunter added: “At this stage, AB Foods expects the impact of events in the Red Sea to have limited disruption to its supply chain and will monitor the situation. In the meantime, the group has pointed out that the improvement in product margin which Primark is currently enjoying should insulate the group against the costs of such supply chain disruptions, should they arise.

“Stock levels are currently in a healthy position and the store opening programme and incremental improvements to its offering, particularly online, offer an enticing glimpse into what could be another year of strong recovery at the retailer, where so many competitors are finding the going increasingly tough.”

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