AB Foods share price: Primark owner says FY outlook improved
Associated British Foods (LON:ABF) has updated the market on its recent trading this morning, flagging impact from the recent Brexit vote.
**Highlights from the company statement:**
Group revenue for the 40 weeks ended 18 June 2016 was 3% ahead of the same period last year at constant currency and 1% ahead at actual exchange rates. This reflects stronger growth in the third quarter of 4% at constant currency and 7% at actual exchange rates.
The underlying operating performance of the group during the third quarter was ahead of our expectation, with an improvement in our sugar business, and on 28 June we completed the buyout of the minority interests in Illovo. In the third quarter, sterling was weaker against most of our major trading currencies compared with the same period last year, resulting in a translation benefit. 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.
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 UK referendum decision to leave the EU has created uncertainty in the business environment and financial markets. 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. Primark operates discrete supply chains for its stores in each of the UK, US and Eurozone. We undertake relatively little cross border trading between the UK and the rest of the EU.
Sterling has weakened significantly since the referendum vote. If current exchange rates continue there will be a translation benefit for the remainder of this financial year. In our next financial year, these rates would have both positive and negative effects on profit. There would be an adverse transactional effect on the profit margin on Primark’s UK sales, currently half of its turnover, a favourable transactional effect on British Sugar’s margins and a translation benefit on group profits earned outside the UK, which last year were some 50% of the total.
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.
As of 07:18 BST, Thursday, 07 July, Associated British Foods plc share price is 2,553.00p.