Associated British Foods benefits from Brexit

ABF has benefited from the weakened pound after Britain’s shock Brexit vote

Associated British Foods (ABF) has reported a 3% rise in revenue during its third-quarter compared with the same period last year, as the business benefited from the weakening pound after the UK vote to quit the EU.

ABF reported its sales were up by 7% over the past 40 weeks to June 18, compared with the same period last year.

“Following the result of the EU Referendum, sterling has weakened further and at these rates we expect a bigger translation benefit in the final quarter, with no material transactional effect,” said the manufacturer.

‘No longer expect decline’

“As a result, our outlook for this financial year has improved and we no longer expect a decline in adjusted earnings per share for the group for the full year.”

The manufacturer said its sugar businesses AB Sugar and Africa-based Illovo had driven the improved performance.

ABF’s sugar businesses had significantly reduced costs by “a combination of continuous improvement, business transformation, capital expenditure and procurement activities”, it said.

But revenue at AB Agri – the company’s agricultural business – had continued to fall. ABF blamed low commodity prices and lower volumes in the UK feed market.

Meanwhile, sales at ABF’s clothing retailer Primark were up by 7% compared with the same period of last year.

Future remains positive

Despite the turmoil in financial markets and the uncertainties linked to Brexit, ABF said its financial prospects remained positive.

“ABF is an international business with diverse interests across 48 countries and a business model that, wherever possible, aligns production with the end markets for its products.

“We have a strong balance sheet and we remain optimistic for the group’s continued growth, particularly with our plans for Primark’s expansion which remain unchanged,” said the business.

Meanwhile, ABF also announced the expansion of Primark into the US and Europe, after the clothing retailer’s successful launch in Boston, Massachusetts last year.

 

Analysts view

‘A positive note from Associated British Food, which intends to continue the European and American expansion of Primark, despite the looming uncertainties of a post-Brexit market, helped lift the FTSE [Financial Times Stock Exchange] as a whole this Thursday, with the stock jumping a healthy 7.5%. Group sales rose 3% for the 40 weeks to mid-June, an improvement in sugar prices (vital to ABF’s British Sugar) complementing Primark’s performance.’

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