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Associated British Foods’ sugar business has contributed to a nasty-looking bottom line for the first half, as expected. Revenue at the owner of Primark and British Sugar nudged up 1% to £6.25bn in the 24 weeks to 28 February, but its pre-tax profit more than halved, down 51% to £213m. The group has been hit hard by the massive decline in sugar prices across the world, and has not been helped by general food deflation and a weakening euro.

The sugar business slumped to a £3m operating loss for the period, compared with a profit of £64m a year ago. But the good news is the agriculture, grocery, ingredients and retail – which includes Primark – divisions all registered growing earnings.

Revenue in the sugar business fell 10% in the period to £928m, but ABF did predict the division would make a “small profit” for the full year. Agriculture and grocery both increased profit despite falling revenues, which can be explained by falling commodity prices.

CEO George Weston called the performance a “sound trading result” with “significant progress” made in operating profit by Primark, agriculture and ingredients and further improvement in grocery’s margin.

“As expected, profitability at AB Sugar was substantially lower as a result of much weaker EU sugar prices,” he added. “Primark’s performance was driven by significant expansion of selling space and superior trading by the stores opened in the last 12 months and plans for its entry into the north-east of the US are well advanced.”

However, chairman Charles Sinclair sounded a more worrying tone for investors. At the very bottom of his review of the half, he said there would be a modest decline in adjusted earnings per share for the full year, which he blamed on the continuing strength of sterling.

The board declared an interim dividend of 10p per share, an increase of 3% on last year.

Shares in Associated British Food (ABF) opened 2.6% lower this morning at 2,788.5p. The company’s stock also fell by 1.5% yesterday ahead of the results.

Morning update

Tate & Lyle has announced a major business realignment to further focus on speciality food ingredients and a significant restructuring of its Splenda sucralose business.

The listed group has signed an agreement with Archer Daniels Midland Company (ADM) to realign the Eaststarch joint venture. The corn wet milling business in Europe – in which each owns a 50% equity share – was formed in 1992 and owns and operates three mills in Slovakia, Bulgaria and Turkey. It also has a 50% equity share in Europe’s largest corn wet mill in Hungary.

Tate said the move would strengthen its speciality food Ingredients business by acquiring full ownership of the more speciality-focused plant in Slovakia; substantially reducing its European bulk ingredients footprint by exiting the plants in Bulgaria, Turkey and Hungary; and giving it €240m in cash on completion of the transaction.

After net exceptional items of around £125m, there will be a profit on disposal of about £60m.

As part of the Splenda restructuring, Tate will pursue a “rigorous” value-based strategy and reduce its future cost base by consolidating all production into the Alabama facility in the US and closing the Singapore plant in spring 2016.

“By realigning the Eaststarch joint venture we will focus in Europe on speciality food ingredients, and our bulk ingredients will become a predominantly North American business with strong market positions and efficient, scale assets,” Tate CEO Javed Ahmed said.

“We are restructuring Splenda as a more sustainable business. Overall, the actions announced today streamline and further focus Tate & Lyle as it continues to transition to a global speciality food ingredients business supported by cash generation from bulk ingredients.”

Tate & Lyle’s (TATE) stock initially opened about 10p down on yesterday’s closing price before spiking back up. It is now 0.8% up at 660p.

Yesterday in the City

It was a very quiet day on the markets for grocery stocks, with not much change on most closing prices come 4:30pm.

Other than falls for ABF ahead of today’s half-year results, Tesco closed 0.7% down to 235p as investors steel themselves for the terrible results on Wednesday. The supermarkets shares are down more than 5% in the past five days.

Majestic Wine (MJW) fared better than most yesterday, rising 1.3% to 380.6p. The stock is up more than 26% so far in April and getting back to the kind of value nor seen since before Christmas.

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