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Food giant ABF reports rising costs as Omicron hits Primark recovery – business live


Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Rising raw materials and commodity costs, supply chain tensions and the energy price crunch are all hitting businesses, adding to the cost of living crisis facing households this year.

Associated British Foods, which owns Primark plus grocery, sugar, agriculture and ingredients businesses, has reported this morning that all its businesses have seen inflationary pressures in the last few months.

ABF, which makes Twinings tea, Ovaltine, Patak’s curry pastes and sauces, Kingsmill bread and Jordans biscuits, has lifted some grocery prices to absorb these rising costs.

In a trading update this morning, ABF says these rising costs are eating into its profit margins too:


In our Grocery, Sugar, Ingredients and Agriculture businesses we have seen an escalation in the cost of energy, logistics and commodities.

We have been implementing plans to offset these through operational cost savings and, where necessary, the implementation of price increases. We expect an increase in the adjusted operating profit for Sugar. We expect reduced adjusted operating profit margins in Grocery and Ingredients at the half year, due to phasing in fully recovering cost but a recovery in the run rate of these margins by the financial year end.

World food prices hit 10-year high last year, according to the UN, pushing up inflation, with rising demand, weak harvest and pandemic disruption all driving up costs.

Primark is now seeing a rise in footfall in UK and Ireland, after Omicron caused some disruption as shoppers stayed away from the high street.


The improving trend in customer footfall was interrupted in December by the rapid rise in Covid-19 cases of the Omicron variant but we are now seeing a recovery in UK and Ireland footfall.

Primark sales were 36% ahead of last year in the 16 weeks to 8th January (in November 2020, some stores had to lock down, which hit Christmas trading that year), with operating profit margins ahead of expectations.

Like-for-like sales at Primark’s UK stores were still 10% below two years ago, before the pandemic.

ABF explains that cost cuts have helped Primark absorb higher costs – and is proposing further job cuts:


The effect of inflationary pressure on raw materials and supply chain in this first quarter has been broadly mitigated by a favourable US dollar exchange rate compared to last year and a reduction in store operating costs and overheads.

We are proposing to simplify our in-store UK retail management structure as part of our ongoing programme to improve the efficiency of our store retail operations.




Associated British Foods financial results

Associated British Foods financial results Photograph: Associated British Foods

Yesterday, Bank of England governor Andrew Bailey warned that inflation pressures may last longer than first thought. Bailey told the Treasury Select Committee that financial markets don’t expect energy prices to start easing back until the second half of 2023, which could mean inflation says higher for longer than expected.

UK inflation hit 5.4% in December, the highest in three decades, meaning prices are rising faster than wages:

The agenda

  • World Economic Forum’s Davos Agenda
  • 9.30am GMT: Weekly economic activity and social change in the UK indicators
  • 10am GMT: Eurozone inflation rate for December (final reading)
  • 12.30pm GMT: ECB Monetary Policy meeting accounts
  • 1.30pm GMT: US weekly jobless figures
  • 3pm GMT: US existing home sales



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