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Associated British Foods PLC ABF

Morningstar Rating
GBX 2,722.00 +8.00 (0.29%)
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Company Report

Associated British Foods Earnings: Strong Profit Recovery Sends Shares Higher

No-moat Associated British Foods reported solid interim results for the 24 weeks to March 2—the first half of fiscal 2024—with constant-currency sales growth of 5% and adjusted operating margin of 9.8%, compared with 7.2% for the same period last year. The strong improvement in profitability was primarily attributed to a return to more normal conditions in supply chains and the easing of inflationary pressure. All segments contributed to the margin improvement, although market conditions remain challenging for the agriculture segment, which posted a 9% sales decline due to continued soft demand for compound animal feed in China and the UK. Management reiterated its upbeat 2024 outlook for significant growth in profitability and cash generation, now ahead of expectations at the start of the fiscal year. The share price was up around 10% in intraday trading on the back of the solid set of results. We are increasing our fair value estimate by 10% to GBX 2,600 per share after updating our short-term forecast to reflect the faster-than-expected operating margin recovery for the group, as well as a time value of money adjustment. The shares appear fairly valued at current levels.

Price vs Fair Value

ABF is trading within a range we consider fairly valued.
Price
GBX 2,714.00
Fair Value
GBX 6,328.00
Uncertainty
Medium
1-Star Price
GBX 7,655.00
5-Star Price
GBX 4,388.00
Economic Moat
Mlbmj
Capital Allocation
Lchcwqf

Bulls Say, Bears Say

Bulls

Primark is in the expansion phase, and new store additions will likely drive earnings growth for years to come.

Bears

The lack of an online retail business represents a potential hindrance to long-term growth, as Primark stands to miss out on about 50% of consumers’ budget allocation to the channel by 2029.

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News

Trading Information

Previous Close Price
GBX 2,714.00
Day Range
GBX 2,624.002,731.00
52-Week Range
GBX 1,804.502,765.00
Bid/Ask
GBX 2,600.00 / GBX 2,799.00
Market Cap
GBX 2.04 Tril
Volume/Avg
671,225 / 1.1 Mil

Key Statistics

Price/Earnings (Normalized)
15.99
Price/Sales
1.04
Dividend Yield (Trailing)
1.74%
Dividend Yield (Forward)
1.74%
Total Yield
4.76%

Company Profile

Associated British Foods is a diversified international retail, food, and ingredients group with 130,000 employees and operations in 50 countries across Europe, southern Africa, the Americas, Asia, and Australia. The group sells branded grocery products, grows and processes sugar, supplies farmers with crop input and animal feed, and runs the popular Primark clothing retail chain. It also supplies ingredients like baker's yeast, enzymes, lipids, and cereal specialities. Some 40% of sales are in the UK. Primark generates more than half of the firm's operating profit.
Sector
Consumer Defensive
Industry
Packaged Foods
Stock Style Box
Large Core
Total Number of Employees
133,000

Competitors

Valuation

Metric
ABF
GPS
ITX
Price/Earnings (Normalized)
15.9914.5925.63
Price/Book Value
1.862.987.40
Price/Sales
1.040.533.84
Price/Cash Flow
9.947.6015.83
Price/Earnings
ABF
GPS
ITX

Financial Strength

Metric
ABF
GPS
ITX
Quick Ratio
0.850.711.45
Current Ratio
1.831.421.79
Interest Coverage
5.436.2224.95
Quick Ratio
ABF
GPS
ITX

Profitability

Metric
ABF
GPS
ITX
Return on Assets (Normalized)
6.91%4.85%17.22%
Return on Equity (Normalized)
11.72%22.84%32.33%
Return on Invested Capital (Normalized)
8.74%6.69%23.96%
Return on Assets
ABF
GPS
ITX
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