Wednesday 22 January 2014

ABF report Q1 2014

ABF, Q1, 2014, financial report

Associated British Foods came out with their Q1 report for 2014 and it can be read here. All the information in this summary is based on that publication.
The report was not accepted mildly and the direct drop was almost -5%. So why did the shares drop this much?

The biggest reason for the drop is most likely due to two things that has happened lately. One is that there has been a lot of talk about that corn-syrup will be allowed in products in Europe even though it is considered to be one step more unhealthy than refined sugar from sugar beets. Personally I would have preferred to see increased taxes on high calorie products no matter if it is from carbohydrates such as sugar or if it is from fat but I guess the food industry lobbying is far to strong for that to be brought in... Still this is a big danger for ABF since the price of the corn-syrup due to that it is so easy to refine is almost 30% less.

The second reason for why the report was poorly accepted comes from that already today without these corn-syrup issues the sugar part of the company did very bad. Please see the table below:

ABF, Q1, 2014, report

What makes me the most sad with the table above is that the management actually felt compelled to make a currency re-calculation of the loss and profit of the revenue in the different segment. Sad, sad, sad and it also tells it all. It was a really bad quarter and they attempt to make it look better.

Grocery, Agriculture and Ingredients had no significant changes in their revenue stream so nothing much to say there.

The good news is that Primark, which was the reason for why I bought ABF, kept doing very well and increased yet again 14%. This should mean that in 2014 it will most likely become the most revenue in bringing segment of ABF.

Oh... and yes, the shares dropped by -5% the day of the report but shortly after it was climbing higher and higher again and are almost back up where it was before the report was published.

Conclusion: The P/E for ABF is very high but I will allow this flower to bloom for some time more before I decide to collect my profit. So the shares will remain in my possession.

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