Associated British Foods (ABF) Share Performance

Shares of Associated British Foods (ABF) (LON:ABF) rose on Tuesday following its results, which beat expectations.

At 5:07 am (1007 GMT), ABF was trading 4.1% higher at £2,383.

The company reported a profit before tax of £1.917 billion, slightly above analysts' estimates of £1.873 billion.

Performance Highlights

• ABF's unit, Primark, exceeded operating profit forecasts.
• The Grocery segment performed in line with expectations.

Analysts at Morgan Stanley noted, “Primark had a stronger end to FY24 than initially guided, with the company’s exit rate boosted by favorable UK weather in September.”

Areas of Concern

However, the Ingredients, Sugar, and Agriculture divisions fell short of analyst predictions.

Share Buyback and Dividends

ABF announced a new share buyback program worth £500 million for fiscal year 2025, with leverage at 0.7 times. The company declared a total dividend payout of 90 pence per share, including a special dividend of 27 pence, exceeding previous forecasts.

Future Projections

ABF targets mid-single-digit sales growth for Primark in fiscal year 2025, with space growth of 4-5%. This indicates low single-digit positive like-for-like sales growth, but a small negative impact from foreign exchange fluctuations.

The company expects its adjusted operating margin to remain steady, stabilizing gross margins while increasing investments to boost sales growth.

In the Grocery division, ABF plans to improve marketing investments to sustain sales momentum and anticipates returning to normal operations in U.S. businesses.

For the Ingredients division, ongoing growth is expected in yeast and bakery ingredients, alongside improved performance in specialty ingredients.

Sugar Division Outlook

The Sugar division anticipates a decline in operating profit to between £50 million and £75 million for fiscal year 2025, with a recovery projected for fiscal year 2026, aligning closer to last fiscal year's profit of £181 million due to lower contracted beet prices and market rebalancing.

Analysts at RBC Capital Markets emphasized, “ABF's largest business, Primark, offers a strong space rollout story in Europe and the US, and remains the leading value player in the UK retail space. We expect a return to positive like-for-like sales growth in FY25 and for operating margin to be fairly stable year-on-year.”