Associated British Foods Warns Coronavirus Threatens Future Supplies
Primark owner Associated British Foods warned on Monday there was a risk of supply shortages on some lines later in the 2019-20 financial year if delays in factory production in China are prolonged due to coronavirus.
AB Foods, which sources a broad assortment of its product from China, said it typically builds inventories in advance of Chinese New Year and, as a consequence, is well stocked with cover for several months and does not expect any short-term impact.
'We are working closely with our suppliers in China to assess the impact on their factories and supply chains and their ability to fulfil our current orders,' the group said in a statement.
'If delays to factory production are prolonged, the risk of supply shortages on some lines later this financial year increases. We are assessing mitigating strategies, including a step up in production from existing suppliers in other regions.'
The group also owns major sugar, grocery, ingredients and agriculture arms.
Several of its food businesses have operations in China. It said the China sugar campaign was completed in January before the coronavirus outbreak developed significantly.
The group said its AB Mauri, AB Agri and Ovaltine factories are operating, but at reduced capacity due to labour and logistics constraints.
AB Foods forecast first-half sales and adjusted operating profit ahead of the previous year. Its outlook for the full-year is unchanged.
Primark's first-half sales were forecast to be up 4.2% on a constant currency basis.
'For the half year, we expect sales growth for the group and expect adjusted operating profit to be ahead of last year on both a lease-adjusted and reported basis,' it said.
'We expect strong growth in adjusted operating profit in the second half, driven by profit growth for Primark and a second half weighting of the AB Sugar profit recovery.'