Primark and Silver Spoon sugar owner Associated British Foods has beaten full year profit forecasts, but its shares are still on the slide.
Profit before tax rose 4% to £655m, with good trading from sugar in the UK and Africa, and Primark where UK like-for-like sales grew strongly. It sees opportunities to expand the retail brand into contentinental Europe. ABF also benefited from the weakness of the pound, given that 50% of its revenue and profit comes from outside the UK. But problems at its sugar business in China and edible oils business in North America held back profits, the company said.
And the company sounded a note of caution about the outlook, saying:
The likely scale and speed of economic recovery remains uncertain, and we are cautious about the outlook for the UK consumer over the next year. However, we expect good revenue and operating profit growth with the benefit of returns from our recent long-term investments and restructuring together with improvement in our Chinese and US businesses. Net financing costs will be higher but we are confident of progress in earnings for the full year.
So the company's shares have lost 12.5p to 820.5p. Jeremy Batstone-Carr at Charles Stanley said:
ABF's share price has risen by 25% over the past 12 months, a reflection of investor hopes that the business might be entering a period of profit growth following several years of treading water. These hopes are reflected in the shares' 14 times forward PE multiple which we continue to believe is too rich to justify as diversified a business as ABF is. We will not be upgrading in the wake of these results and maintain our reduce recommendation.
