Weak sugar prices continue to hamper profitability for Associated British Foods (ABF). The sugar division dipped into the red in the six months to 28 February, reporting a £3m operating loss after revenue fell 10 per cent to £928m.
Yet management still expects the division to make a small profit for the full year, following a bumper sugar-beat harvest in the UK and Spain as well as record extraction rates. There are also signs that EU sugar prices have started to stabilise somewhat, with quota levels returning to historical norms.
Primark is the diamond in ABF's crown. Sales at the discount retailer jumped 12 per cent to £2.5bn, driving an 8 per cent increase in profit to £322m. However, revenue growth was entirely generated by new stores - like-for-like sales were actually flat. The profit margin also dipped as Primark slashed prices. A final problem is that products are sourced in US dollars, so costs are likely to increase this year, given the strength of the greenback.
Elsewhere in the group, things are looking up. Grocery profit rose despite a 4 per cent decline in revenue, fuelled by the group's tea operations, while profit nearly doubled to £28m at ABF's ingredients division. That left group adjusted operating profit down 2 per cent to £474m overall.
Prior to these results, Numis Securities was expecting full-year EPS of 103p, down from 104p last year.
| ASSOCIATED BRITISH FOODS (ABF) | ||||
|---|---|---|---|---|
| ORD PRICE: | 2,737p | MARKET VALUE: | £22bn | |
| TOUCH: | 2,736-2,738p | 12-MONTH HIGH: | 3,293p | LOW: 2,407p |
| DIVIDEND YIELD: | 1.3% | PE RATIO: | 38 | |
| NET ASSET VALUE: | 784p* | NET DEBT: | 12% | |
| Half-year to 28 Feb | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 6.21 | 434 | 43.2 | 9.7 |
| 2015 | 6.25 | 213 | 18.1 | 10 |
| % change | +1 | -51 | -58 | +3 |
Ex-div: 4 Jun Payment: 3 Jul *Includes intangible assets of £1.43bn, or 181p a share | ||||
