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Sugar operations drive Associated British Foods profits
As Associated British Foods ABF reports figures in line with expectations for the second half of the financial year Nick Raynor, investment adviser at The Share Centre, explains what this means for investors.
“Headlines today mainly focus on the performance of ABF’s retail chain Primark and, although its sales figures were up by 13% compared to last year, there is far more to the company that investors should focus on. The company has high international exposure and it was its overall global performance that was behind our decision to upgrade ABF to a ‘buy’ not so long ago.
“Continued improvements to ABF’s sugar operations have been the main driver behind the business. The lack of UK export sales and low sales in South Africa were compensated for by strong performance in China and Spain.
“Positive figures were also seen in the grocery business with revenues and profits expected to be ahead of last year. Although there was a strong UK performance, trading in Australia was weaker than expected. Again brands that investors don’t necessarily associate with ABF, such as Twinings and Ovaltine, offset the weaker elements of the business.
“Primark’s margins remain under strain, however this squeeze is to be expected during the sale period. We expect the retailer’s figures to improve in the coming months and it could benefit from the weaker UK economy.
“We continue to recommend investors ‘buy’ ABF. The company’s global diversity is one of the main attractions for investors and they will be pleased to see overseas business driving performance. ABF has also held up reasonable will in these volatile markets.”
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THIS DATA IS PROVIDED BY NICK RAYNOR, INVESTMENT ADVISER AT THE SHARE CENTRE. THIS IS NOT INTENDED TO CONSTITUTE AN OFFER OR AGREEMENT TO BUY OR SELL INVESTMENTS.
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Investing in general, and the products and services mentioned above may not be suitable for all: if in doubt, individuals should seek independent financial advice. The value of investments and the income from them can go down as well as up and investors may not get back their original investment. Past performance is not a reliable indicator of future performance.
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Back2011-09-13 12:02:56 © Moneyextra.com