City File: Associated British Foods

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ON FRIDAY the market decided Associated British Foods was overvalued, and marked the shares down 12p to 495p ahead of tomorrow's figures. The shares' cheerfulness had owed a lot to hopes of rationalisation in the baking industry after Tomkins' takeover of Ranks Hovis McDougall.

But there is no sign of any let-up in competition, especially as independent bakeries have entered the contest for own- brand business in a big way.

ABF also faces a number of other negatives, including a grim outlook in the Irish grocery business, and lower yields on the group's famous cash hoard. The only cheer is expected from the old British Sugar business. Alan Erskine of NatWest Securities is not alone in expecting a bad reaction 'to a disappointing set of results and gloomy trading statement'.