Join our community of smart investors

Sugar low hits ABF

Plummeting sugar prices have hit trading at Associated British Foods, offsetting impressive growth elsewhere in the business
November 4, 2014

A slump in sugar prices held back profit growth at Associated British Foods (ABF) during the year to September, offsetting a good showing from the group's other divisions. This trend looks set to continue in the current financial year, prompting chairman Charles Sinclair to warn that group adjusted operating profit would dip slightly. The impact on earnings should be mitigated by lower tax and interest charges, but he sees "limited opportunity to grow adjusted earnings per share" this year.

IC TIP: Hold at 2670p

Last year profit in the sugar division fell 56 per cent to £189m and the margin nearly halved. Sugar aside, the combination of food price deflation and the strengthening of sterling led to lower revenue across ABF's foods businesses. However, the grocery, agriculture and ingredients divisions still served up impressive profit growth, thanks to increasing market share, greatly improved margins and a turnaround in the yeast and bakery business.

Meanwhile, Primark had a smashing year. Profit soared 29 per cent to £662m, thanks to like-for-like sales growth of 4 per cent. Overall, group adjusted pre-tax profit grew 2 per cent to £1.1bn.

Broker Shore Capital expects underlying EPS of 106p for the current financial year, up from 104p.

ASSOCIATED BRITISH FOODS (ABF)
ORD PRICE:2,670pMARKET VALUE:£21bn
TOUCH:2,669-2,670p12-MONTH HIGH:3,156pLOW: 2,175p
DIVIDEND YIELD:1.3%PE RATIO:28
NET ASSET VALUE:813p*NET DEBT:7%

Year to 13 SepTurnover (£bn)Pre-tax profit (£bn)Earnings per share (p)Dividend per share (p)
201010.20.7669.323.8
201111.20.7668.724.8
201212.30.7670.328.5
201313.30.8774.032
201412.91.0295.534
% change-3+18+29+6

Ex-div: 11 Dec

Payment: 9 Jan

*Includes intangible assets of £1.46bn, or 185p a share