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Associated British Foods benefits from plunging pound

Shares in the Primark owner rose 141p, or 5.5%, to 2694p in early trading
A Primark shop
Increasing selling space drove a 7% rise in sales at Primark in the year to date against a year ago

Britain's vote to leave the EU may be causing the pound to plummet, but that has spelt good news for Associated British Foods plc (LON:ABF).

Shares in the Primark owner rose 141p, or 5.5%, to 2,694p after it said the fall in sterling to 31-year lows meant it no longer anticipated a decline in full-year adjusted earnings per share.

In the third quarter, sterling was weaker against most of its major trading currencies compared with the same period last year, resulting in a translation benefit.

"Following the result of the EU referendum, sterling has weakened further and at these rates we expect a bigger translation benefit in the final quarter," ABF said in a trading update.

ABF said its underlying operating performance in the third quarter topped its expectations, with an improvement in its sugar business.

Sales at Primark in the year to date were 7% ahead of last year at constant currency driven by increased retail selling space.

Sales at actual rates in the quarter benefited from sterling weakness and so, cumulatively, were also 7% ahead.

Like-for-like sales in the last 16 weeks took a hit from unpredictable weather, with an especially cold April followed by a return to more seasonal weather in May.

But the group hailed upbeat early trading of new shops in the UK, mainland Europe and the US.

ABF's grocery businesses boosted revenue in the third quarter.

Twinings Ovaltine made further advances in its biggest markets of the UK, US and Thailand and sales volumes at Allied Bakeries - home to Kingsmill and Sunblest - were well ahead of last year, although margins stayed under pressure.

Group revenue for the 40 weeks to June 18 was 3% ahead of the same period last year at constant currency and 1% ahead at actual exchange rates.

That reflected stronger growth in the third quarter of 4% at constant currency and 7% at actual exchange rates.

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