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Associated British Foods PLC - Stock Quote ABF

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Morningstar's Associated British Foods PLC Stock Analysis

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Recovery Continues in H1 for ABF, but Lower-Margin Fiscal 2022 Guidance Due to Cost Inflation

Ioannis Pontikis, CFA Senior Equity Analyst

Analyst Note

| Ioannis Pontikis, CFA |

Following its preclose trading update in February 2022, Associated British Foods, or ABF, reported interim results for the 24 weeks to March 5 (first-half fiscal 2022) with group EBIT of GBP 706 million, of which GBP 414 million was contributed by Primark for an 11.7% adjusted operating margin. Revenue for the group was up 25% (up 28% in constant currency), still about 5% lower than fiscal 2020 levels. Management continues to expect significant progress for the year in adjusted operating profit and adjusted earnings per share for the group, in line with our expectations. Within this though, Associated British Foods now expects a greater reduction in the second-half operating margin for Primark with the full-year margin expected at around 10% versus 11.4% in our model. Similarly, for the group's food businesses, the company now expects a greater margin reduction for the full year due to significantly higher commodity and energy price inflation that takes time to pass on to consumers, with a full run-rate margin recovery expected in the next financial year. We maintain our fair value estimate and no moat rating for Associated British Foods. 

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Associated British Foods PLC's Company Profile

Business Description

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 bakers' yeast, enzymes, lipids, and cereal specialities. Some 40% of sales are in the U.K., and Primark generates more than half of the firm's operating profit.

10 Grosvenor Street, Weston Centre
London, W1K 4QY, United Kingdom
T +44 2073996500
Sector Consumer Defensive
Industry Packaged Foods
Most Recent Earnings
Fiscal Year End Sep 18, 2022
Stock Type
Employees 128,000