The stock market recovery in January did not stretch to food suppliers. The FTSE-350 Food Producers Index lost 4% over the month while the FTSE All-Share surged 3% - in stark contrast with their year-on-year performances, which saw food shares gain 11% and the FTSE All-Share fall 4%.
The reversal in fortunes is partly the result of investors responding to renewed macroeconomic optimism by selling staple “safe” stocks in food companies in order to invest in more cyclical companies in sectors such as banking.
It is also down to the long shadow cast by Tesco’s poor Christmas figures and pessimistic forecast over suppliers’ share prospects. “The profit warning from Tesco has affected sentiment towards manufacturers because investors fear the supermarket will be chasing suppliers to recover cost,” said Panmure analyst Damian McNeela.
Among the suppliers to lose 5% or more in January were Unilever, Tate & Lyle, Dairy Crest and Hilton Food Group. Unilever’s share price fell further on Thursday after it reported underlying sales growth of 6.6% for the fourth quarter of 2012.
A slowdown in emerging market growth and continued weakness in Europe and North America sent share prices down 3.5% to 2,012p by mid-morning. The Anglo-Dutch company had been a lynchpin in the food sector’s strong stock market performance in 2011 because of its ability to grow despite the weak global economy. Even after the recent falls, Unilever still trades 14% above its price a year ago.
Another recent faller, Dairy Crest - which was hit in January by news that Müller had acquired its rival Robert Wiseman - enjoyed a more positive stock market reaction to its results this week. News that its like-for-like sales had increased 2% over the nine months to the end of December sent shares up just over 3% to 323p.
Meanwhile, Ocado continued its rollercoaster ride on the markets this week. Its share price leapt over 20% to 98p after it reported a slightly lower than expected pre-tax loss of £2.4m for 2011. The online grocer has been a regular feature in the top five FTSE risers and fallers in recent weeks following a profit warning in December, news of good Christmas results early in January and last week’s surprise announcement of CFO Andrew Bracey’s departure.
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