ABF 'bad news' no worse than expected: analysts

By Anne Bruce

- Last updated on GMT

Related tags: Associated british foods

ABF 'bad news' no worse than expected: analysts
The “bad news was no worse than expected” said analysts, after Associated British Foods (ABF) posted its third quarter trading update to June 25 2011 this morning.

Martin Deboo, an analyst at Investec, said in a note: “This is a decent update in the light of difficult trading conditions in UK retail (Primark) and Grocery and supply disruptions in sugars…We are happy buyers this morning on a 12 month view​.”

He added: “UK Grocery (Bread, Ryvita, Patak's & Silver Spoon) is challenging, as we would have expected on the back of Premier Foods' travails​.”

ABF, which also operates the Primark clothing business, said group revenue from continuing operations in the year to date was up 9%. Grocery revenues in the quarter increased by 6% over last year and were 7% ahead on a year-to-date basis.

Margin erosion

The company said that the UK grocery retail environment remained very competitive, with high promotional activity in the large multiple retailers.

But it said the Jordans and Ryvita brands had achieved strong sales growth on the back of effective marketing, while Silver Spoon's baking ingredients also performed strongly with consumers returning to home baking.

The Blue Dragon oriental food brand performed in line with expectations following its relaunch and Indian food brand Pataks continued to perform well.

Twinings Ovaltine achieved further good growth in the quarter with higher volumes and strong pricing across the group but notably for tea in the US and for Ovaltine in Thailand and its developing markets, it said.

Howver, promotional discounting had resulted in some margin erosion at Kingsmill in during the third quarter, ABF said.

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