There was not much to bite into with this report. ABF have a tendency to focus on the half year reports to the previous one and the annual one and there in between so Q1 and Q3 is minimal statements without in my eyes no useful information and presented in a format that I hardly agree with. Either way... they stock market was not so happy and ABF dropped with almost 2%. Was it correct I wonder?
Yes it was. As can be seen in the revenue statement table below we see that it is minus, minus, minus. The two pillars that carry ABF is sugar and retail and for that reason when sugar is performing poorly then it has a huge impact on both revenue and earnings. What was even worse was that they wrote that they expect sugar to drop further and that they are forced to start a cut, cut, cut costs program.
There has been a lot of bad news in the media concerning Primark lately also. When they opened the second store here in Berlin on Alexanderplatz there were almost equal amount of protesters as there were clients due to the notes that had been found sown into the cloths from one or several unhappy employees.
It is not easy for a company to protect themselves against an unhappy or for that matter a criminal employee. The only thing one can do is to make sure that things are done correctly and that people are being paid an honest salary for an honest work in the country of origin and to help the police when dealing with the criminal employees. There for instance all the banks have completely failed when they decided to protect their employees.
Conclusion: ABF has for a long time been highly overvalued in my eyes and for every %-age the share price goes higher I go more and more uncertain and have to keep remembering what Peter Lynch said to about watering the flowers. I will, however, continue as a shareholder in ABF for now...
If you want to find out more about ABF then please see analysis of Associated British Foods (ABF) 2013.
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