Associated British Foods said the outlook for its Primark fashion business was improving, but it cautioned its food businesses were facing increasing inflationary pressures.

The group said sales and adjusted operating profit for its first half to March 5 would be "strongly ahead" of the prior year and ahead of pre-Covid 19 levels, reflecting a better performance from Primark.

Primark's sales were forecast to be well over 60% ahead of last year at constant currency with an operating profit margin of 11%. Primark trades as Penneys here.

The improved outcome reflected all Primark stores remaining open and trading throughout the period except for short spells in Austria and The Netherlands.

That compared to prolonged periods of store closure in the UK and Europe in the first half of last year.

"Omicron really reduced footfall in December but now across the piece we're seeing footfall improving," finance chief John Bason told Reuters, highlighting strong demand for luggage and swimwear.

The effect of inflation on raw materials and the supply chain in Primark was broadly mitigated by a reduction in store operating costs and overheads and a favourable US dollar exchange rate.

It said in January it would not raise prices for spring/summer.

The group said all its food businesses had experienced increasing inflationary pressures in raw materials, commodities, supply chain and energy.

Steps have been taken to offset these higher input costs through operational cost savings and in the grocery, ingredients and agriculture businesses, the implementation of price increases. However, the group cautioned the price rises inevitably lag input cost inflation.

As a result, it expects some margin reduction in these three businesses at the half year but expects a recovery by the financial year-end.

AB Foods' grocery brands include Twinings tea, Jordans cereals, Kingsmill bread and Ovaltine drinks.

The group expects further growth in profit at AB Sugar at the half year.

AB Foods outlook for the full year was unchanged with "significant progress" expected in both adjusted operating profit and adjusted earnings per share.

Steps have been taken to offset these higher input costs through operational cost savings and in the grocery, ingredients and agriculture businesses, the implementation of price increases. However, the group cautioned the price rises inevitably lag input cost inflation.

As a result, it expects some margin reduction in these three businesses at the half year but expects a recovery by the financial year-end.

AB Foods' grocery brands include Twinings tea, Jordans cereals, Kingsmill bread and Ovaltine drinks.

The group expects further growth in profit at AB Sugar at the half year.

AB Foods outlook for the full year was unchanged with "significant progress" expected in both adjusted operating profit and adjusted earnings per share.

Meanwhile, the company's finance chief said the company has minimal direct exposure to Ukraine and Russia, though the group could be impacted if the conflict drives up the global price of wheat.

AB Foods' grocery businesses use a lot of wheat, mostly from the UK

"In terms of direct trading with Ukraine, it's not that material to the group," John Bason told Reuters after the group updated on trading.

But he noted that AB Foods' grocery businesses, which include Allied Bakeries, use a lot of wheat, mostly from the UK.

"Ukraine is a big producer of wheat so the world wheat price will react if there are any supply shortages," said Bason.

"It's those secondary effects of volatility in the commodity markets, that's where I think we will likely see some effects," he added.

He also said it was too early to say what the scale of any impact would be.