Investment: ABF's results prove it has recipe for success

THE STRENGTH of sterling continues to be a major headache for Garry Weston's Associated British Foods.

The strong pound hammered the Twinings Tea and Burton's biscuits group at the interim stage in April and yesterday's full year numbers showed further scars. A pounds 37m currency hit pushed profits down from pounds 426m to pounds 391m, excluding exceptionals.

The pound may have eased slightly but not enough to make much of a difference. It will continue to hurt British Sugar where profits fell by pounds 28m to pounds 151m last year. A bumper crop boosted processing volumes but this was not enough to counter the currency impact. The division was also hit by a pounds 28m fine from the European Commission for alleged price fixing by the company in the 1980s. This necessitated a pounds 19m provision in the full-year accounts.

Elsewhere, milling and baking profits were hit by the poor harvest last year and overcapacity in the baking market. But in the US the food ingredients businesses have done well with combined profits rising by pounds 10m to pounds 19m helped by a strong performance from the AC Humko speciality oils business. Last month's pounds 120m acquisition of SBI, which produces ingredients for the beauty industry, will increase ABF's presence in this sector.

Although trading will continue to be tough, investors can expect Mr Weston to find a few more uses for ABF's notorious cash pile. Currently standing at pounds 1.5bn and yielding income of pounds 119m, the warchest has more buying power in the present environment of weakening asset values. Although no-one should expect a mega-deal from the cautious Mr Weston, ABF is expected to continue adding on growth businesses in core areas such as food ingredients.

This is not one of ABF's more exciting phases - its trading profits have gone virtually nowhere over the past few years. But it remains a steady performer. On current year profit forecasts of pounds 425m, the shares - up 29p to 589p yesterday - trade on a forward p/e of 18. That is just behind the two most highly rated British food companies, Unilever and Cadbury Schweppes. A solid hold.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor