Investors attracted to ABF as sugar and fashion divisions boost results

As Associated British Foods (ABF) reports Q3 results, Sheridan Admans, investment research manager at The Share Centre, explains what they mean for investors.

"ABF released a strong set of results this morning and investors will be pleased to see divisions across the group performing well. Its sugar division in particular produced good results with production in the UK ahead of last year, and mild improvement in China. The group also expects production volumes in its subsidiary Illovo, Africa's leading sugar producer, to be ahead of the last year. Revenues for the division were up 54% in the quarter despite prices in China falling. We still expect ABF to overproduce in Europe and the excess to be exported and converted into ethanol, further improving profit margins.

"Despite the outlook and difficult conditions for fashion retailers, Primark continued with strong revenue momentum with sales increasing by 16% in the quarter year on year, which is in stark contrast to Marks and Spencer's results earlier in the week. Sales are being driven by an increase in sales space and operating margins saw improvement from lower input costs.

"The grocery and agriculture divisions also fared well, however expansion in the ingredients division slipped slightly in revenues due to some volume weakness.

"We continue to recommend ABF as a ‘buy' for investors seeking a moderately defensive business that offers potential for growth. We believe the business is well positioned to take advantage of the difficult trading conditions companies and consumers are facing."