StockMarketWire.com - Associated British Foods reported a decline in annual profit as weakness in its sugar division offset growth in its grocery section and at clothing retailer Primark.

The company also said that Primark would see margins compress in the first half of the current financial year, owing to a weaker pound.

For the year ended 14 September, pre-tax profit fell 8.1% to £1.2bn, even as revenue rose 2% to £15.8bn.

Adjusted pre-tax profit rose 2% to £1.41bn.

The company's grocery businesses saw underlying profit growth of 14% after adjusting for £12m of cost for the closure of a Twinings tea factory in China.

Primark delivered an 8% increase in profit, though like-for-like sales declined 2%, pressured by weak trading in Germany.

AB Sugar revenues fell 7% on a constant currency basis and adjusted profit slumped 79%, mainly due to the effect of a further decline in EU sugar prices and a poor crop in China.

Associated British Foods declared a full-year dividend of 46.35p a share, up 3% on-year.

Looking ahead, the company touted improved performance in its sugar business, offset by a weaker first-half margin performance at Primark.

'In the coming year, AB Sugar will benefit materially from the increase seen this year in EU sugar prices and from further cost reduction,' it said.

'We expect cost reductions in both the cost of goods and overheads during the year, but the weakness of sterling during this financial year will result in a margin decline for Primark in the first half.'

'The sterling exchange rate is currently very volatile but, at current exchange rates, we now expect margin in the second half to be in line with the same period this year and margin for the full year to be only a small reduction on that achieved this year.'

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