Morningstar | In Line 3Q Trading Update for Associated British Foods With Primark Gaining Share in the UK
Associated British Foods reported results for the 40 weeks to June 22, with group revenue up 3% (up 2% at actual exchange rates), broadly in line with our expectations. Management reiterated fiscal 2019 guidance for flat adjusted operating profit and adjusted earnings per share, significantly lower AB Sugar profit (largely reflected in the first half), and strong Primark space growth. We maintain our no-moat rating and GBX 2,660 fair value estimate.Primark's outperformance (a significant increase in market share across the United Kingdom) continued with sales up 4% (at constant and actual exchange rates), driven by the expansion of retail space (on track to reach guided 0.95 million sq ft by the end of 2019) and partially offset by a 2% contraction in like-for-like sales because of unseasonable weather in May. This is all in line with commentary on clothing performance from U.K. grocers. Management said there was an improvement in sales during June for their Europe and U.K. operations, with continued weak trading in Germany. In the United States, Primark continued to deliver "encouraging" like for-like and total sales growth. Profit was well ahead, versus the same period in 2018, at 11.7%. This was driven by better buying, lower markdowns, and currency gains, with the last expected to reverse in the second half because of a stronger dollar. Management expects a year-on-year increase in margin because of a higher offset from better buying and lower markdowns than previously anticipated.
In sugar there is an uptick in prices, according to management, because of a lower crop area. Production for the 2019/2020 campaign in the U.K. is expected to be in line with that of 2018 (1.15 million metric tons), driven by an improvement in beet yield and despite a 7% reduction in crop area.
In other businesses, sales were in line with expectations, with grocery and ingredients sales up 1% and 5% respectively, at constant currency.
Associated British Foods is an international food, ingredients and retail group. Co. operates in five segments: Grocery, which manufactures grocery products, including hot beverages, sugar and sweeteners, vegetable oils, bread and baked goods, cereals, ethnic foods, and meat products; Sugar, which grows and processes sugar beet and sugar cane for sale to industrial users; Agriculture, which manufactures animal feeds and provides other products and services for the agriculture sector; Ingredients, which manufactures bakers' yeast, bakery ingredients, enzymes, lipids, yeast extracts and cereal specialities; and Retail, which buys and merchandises value clothing and accessories.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.