Associated British Foods said profit margins at its Primark business are set to benefit from the recent weakness of the US dollar versus the pound.

This is because the fashion chain - which trades as Penney's here - sources the majority of its goods in dollars from the Far East. 

Primark accounts for about half of AB Foods' revenue and profit. The division has driven the group's strong growth over the last decade as its fast fashion at discount prices has struck a chord with young consumers. 

AB Foods said Primark's operating margin in the first half of its 2017-18 financial year would be close to that of the previous year.

Better buying terms are virtually offsetting the adverse effect of the US dollar exchange rate. 

AB Foods forecast an improvement in Primark's margin in the second half, driven by better buying and the recent weakness of the US dollar.

The pound fell almost 20% compared to the dollar in the months after Britain voted to leave the European Union in June 2016 but is up 5.4% against the dollar over the last three months and 8.6% over the last six months. 

Primark would get a bigger benefit from the currency shift in its 2018-19 year, said AB Foods' finance director John Bason.

The group also owns major sugar, grocery, agriculture and ingredients businesses.

It maintained its overall full year outlook, forecasting progress in both adjusted operating profit and adjusted earnings per share (EPS). 

AB Foods forecast flat adjusted operating profit for its first half to March 3, held back by a previously flagged reduction in sugar revenues. However, lower finance costs and a lower tax rate would lead to higher adjusted EPS. 

AB Foods made adjusted operating profit of £652m in the first half of its 2016-17 year and adjusted EPS of 59.7 pence. 

Total first half sales at Primark were forecast to be up 7% at constant currency rates, with like-for-like sales seen up 1% in the final 16 weeks of the period. 

The group forecast first-half sales growth in all of its other businesses apart from sugar. 

Before today's update the group's shares, majority owned by the family of CEO George Weston, had fallen 6% this year, partly reflecting the outlook for its sugar business. 

In January it had warned that revenue and profit from sugar would fall more than previously forecast in 2017-18 because of lower prices across the EU.