What to Look For in Associated British Foods' Results


LONDON -- On Monday, Associated British Foods is set to release its interim pre-close trading update -- but what should investors expect from the results?

Back in mid-January, in its third-quarter interim management statement, the company revealed a 10% rise in group revenue against the same period the previous year, with sugar and retail performing particularly well with respective increases of 12% and 25%.

Primark is undoubtedly the jewel in ABF's crown, with management noting good seasonal trading and a "substantial increase in retail selling space and superior sales densities in the larger new stores." The firm looks set to capitalize on its success with its business strategies, with a larger number of products placed in stores and more new shop openings, including in Spain, where it opened six new stores in the third quarter.

Today's news that the eurozone economy is set to shrink by 0.3% in the first quarter of 2013, which sent the FTSE 100 tumbling 104 points today, actually serves to benefit Primark -- it has prospered over the last five turbulent years, helping ABF to triple its share price from a low of 613 pence in 2009. And with France's economy currently looking bleak, the company might be able to capitalize with its first Primark store in the country, set to launch by September, followed by up to a dozen stores potentially opening over the next two years.

While Primark goes from strength to strength, the sugar side of things isn't expected to perform as well. The AB Sugar business is expected to show lower full-year results as a consequence of lower sugar-production, higher sugar prices, and a weaker euro. There is also uncertainty hanging over its Zambia Sugar operations, with ABF having to forcibly deny allegations that it is illegally or immorally avoiding paying millions of pounds worth of tax in the African country.

These two divisions aside, I'll be keenly awaiting news on ABF's agriculture, grocery, and ingredients operations in order to see how they fare and contribute to the company.

ABF was one of the FTSE 100's best performers last year, and it has begun 2013 strongly. A forecast yield of 1.7%, along with the company's aforementioned threefold increase in share price over the last five years, makes Associated British Foods a growth share favorite.

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