ABF still a strong bet despite sugar profit drop

By James Ridler contact

- Last updated on GMT

ABF still in a strong position claim experts, despite poor performance from sugar division
ABF still in a strong position claim experts, despite poor performance from sugar division

Related tags: Finance

Associated British Foods (ABF) continues to be a safe bet within the food and drink manufacturing industry, despite taking a hit from dwindling sugar profits, according to industry experts.

The statement, issued ahead of its full-year results for the 52 weeks to 12 September 2019, reported continued strong performance from ABF’s grocery division – boosted by improved manufacturing capacity at Jordans, Dorset Cereals and Ryvita and strong revenue growth from Twinings Ovaltine – but anticipated the decline of AB Sugar would put a dent in this year’s profits.

However, Rollits corporate finance director Julian Wild said ABF was a “very well-oiled machine”​ that continued to “trundle along with strong performances from Primark in retail and also from the grocery business”.

‘Safe bet’

“All in all, the statement suggests that the full year results to September will be in line with expectations, so no surprises. ABF’s share price was down in early trading, indicating some early profit-taking, but there are not many safer bets than ABF around.”

Wild also noted that a substantial amount of ABF’s business was being performed outside the UK. As such, the weakness of sterling – brought about by the confusing political state of the UK thanks to Brexit – was beneficial to the business.

Market analyst Steve Miley noted that ABF came to the same conclusion.

Weathering Brexit

“With two-thirds of the revenue generated outside the UK, the company has announced the completion of the Brexit preparations and has put the contingency plans in place in case of disruptions caused by Great Britain exiting the EU,”​ Miley added.

“The cash levels held at the end of the period will allow the company to navigate unforeseen events caused by the departure from the European bloc.”

Helping along the business was an increase in cash flow, up almost 50% to £900m, thanks to a lower expenditure on food business in the reported period. ABF’s full-year results are scheduled to be announced on 5 November 2019.

Related topics: Bakery, Operations, Drinks

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