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Associated British Foods (ABF) has seen a 3% increase in constant currency revenues from continuing businesses across its first three quarters thanks to growth in grocery, Primark and a third quarter improvement in its sugar division.

Total revenues from continuing businesses for the 40 weeks ended 22 June 2019 were 3% ahead of the same period last year at constant currency and 2% at actual exchange rates.

Excluding sugar, sales growth from continuing businesses was 4% ahead at both constant currency and at actual exchange rates.

Revenues in its grocery division in the third quarter were 1% ahead of last year. Operating profit margin for the full year is expected to be ahead with “good” trading in Twinings Ovaltine, Acetum, AB World Foods, ACH in the US and George Weston Foods.

ABF said it continues to take action to reduce the cost base at Allied Bakeries and it has undertaken a detailed review of its network to optimise production capacity and locations, and routes to market.

Last month it announced our proposal to relocate its bakery operations from Cardiff to other facilities in the UK, the costs of which have been included in our full year outlook for adjusted operating profit.

Revenue from continuing businesses at AB Sugar was in line with last year in the third quarter. This represented an improvement on the decline in sales in the first half and was driven by the expected later phasing and higher sales at Illovo.

ABF said EU stock levels have been tightening during 2018/19 as a consequence of lower sugar production in the last campaign. Early indications are that EU sugar production for 2019/20 will remain at this lower level following a reduction in the crop area. As a consequence, stocks are forecast to remain low which should underpin the higher spot EU sugar prices following their recovery earlier this year.

In ingredients, revenue in the third quarter was 5% ahead of last year driven by both AB Mauri and ABF Ingredients. Agriculture revenue growth continued in the third quarter at AB Agri, driven by higher feed sales.

In its key Primark division, sales are up 4% year-to-date on constant currency and actual exchange rates, driven by increased selling space partially offset by a decline in like-for-like sales.

In the UK the sales growth recorded in the first half continued in the third quarter and Primark recorded a further significant increase in market share. Like-for-like sales were held back by unseasonable weather in May which compared to a favourable market environment in the corresponding period last year, though it has seen an improvement in sales in June.

It US Primark business continued to deliver “encouraging” like-for-like and strong total sales growth.

Overall, for the full year ABF expects “good” profit growth in Primark and, on an underlying basis, in grocery.

It said the full year profit decline in sugar has been reflected in the first half and so its full year outlook for the group is unchanged, with adjusted earnings per share expected to be in line with last year.

Morning update

C&C Group (CCR) has issued a trading update covering the period from 1 March 2019, saying it has made a “solid start” to its financial year and trading to date in line with current market expectations.

CEO Stephen Glancey said: “FY19 was a transformational year for the group. The acquisition and subsequent performance of Matthew Clark & Bibendum contributed to earnings growth of over 20%.

Reflecting the inherent strength of the C&C business today, our objective is to again deliver double digit EPS growth in FY20. Thereafter, we will target EPS growth in a mid to high single digit range.”

Additionally, following its acquisition of Matthew Clark and Bibendum, a majority of the group’s revenues, earnings and activities are now derived in and from the UK and so it is seeking inclusion in the FTSE UK Index Series.

In order to facilitate the entry into the FTSE UK Index Series, C&C intends to apply for the cancellation of the listing and trading of C&C shares on Euronext Dublin.

On the markets this morning, ABF shares are trading 0.3% up at 2,450p following its third quarter update.

The FTSE 100 has opened flat at 7,609.5pts.

Early risers include C&C Group (CCR), up 3.6% to €4.08, Bakkavor (BAKK), up 2.3% to 118.3p, McBride (MCB), up 1.7% to 80.2p and Sainsbury’s (SBRY), up 1.4% to 201.3p.

Fallers include Coca-Cola HBC (CCH), down 7.3% to 2,851p, FeverTree (FEVR), down 4.1% to 2,242p and CAKE Box, down 1.2% to 171.5p.

Yesterday in the City

Big four grocery Sainsbury’s slid 0.5% back to 198.5p yesterday after releasing its first quarter sales figures as it continues to bounce around multi-year lows following the collapse of its merger with Asda. Sainsbury’s did reach 204.2p in early trading after announcing a 1.6% fall in like-for-like sales over the 16 weeks to 29 June on better grocery sales trends, but fell away through the day.

Overall the FTSE 100 continued its stronger run this week, rising by 0.7% to 7,609.3pts.

The tobacco companies led fmcg FTSE 100 risers, with British American Tobacco (BATS) climbing by 2.5% to 2,973p and Imperial Brands (IMB) by 2.4% to 1,984p. Ocado (OCDO) was up 2.4% to 1,220p yesterday, while Compass Group (CPG) was up 1.7% to 1,953.5p.

Other risers yesterday included Devro (DVO), up 4.5% to 221.5p, Hotel Chocolat (HOTC), up 2.2% to 345p, Majestic WINE (WINE), up 2.1% to 270p, Britvic (BVIC), up 2.1% to 918.5p and Greggs (GRG), up 1.9% to 2,374p.

Yesterday’s fallers included Bakkavor, down 4% to 115.6p, PureCircle (PURE), down 2.8% to 239.8p, FeverTree (FEVR), down 1.8% to 2,337 and Premier Foods (PFD), down 1% to 34.2p.

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