Associated British Foods PLC 

Associated British Foods PLC (LSE: ABF) a constituent of the FTSE 100 index, operates as a diversified conglomerate with a portfolio spanning food production and retail. The company is structured into five key divisions: Grocery, Ingredients, Agriculture, Sugar, and Retail. Its Grocery division specializes in manufacturing a broad range of food products, including hot beverages, sweeteners, vegetable oils, balsamic vinegars, baked goods, cereals, ethnic foods, and meat products. These products are distributed through retail, wholesale, and foodservice channels, serving diverse consumer and commercial markets.

Key Recommendation Rationale – Sell at GBX 2,313.00

• Resistance near Current levels: ABF’s stock price crossed the Resistance (R1) which was stated in the previous report on 06 June 2025 therefore, there could be a possibility that the stock might consolidate or decline from the current levels, considering overstretched valuation. Considering the market conditions and the price action, it is prudent to exit from the stock.
• Declining Profitability in Key Segments: The Sugar division reported an adjusted operating loss of £16 million, a significant downturn from the £125 million profit in the prior year. Persistent low European sugar prices and operational challenges in Vivergo and Azucarera have contributed to this decline. The segment’s struggles raise concerns about its ability to recover profitability in the near term, especially given the slower-than-expected rebalancing of supply and demand in European markets.
• Weak Performance in the UK Retail Market - Primark’s UK and Ireland sales declined by 4%, with like-for-like sales dropping by 6% when adjusted for store changes. The UK clothing retail market has been under pressure due to cautious consumer sentiment and mild weather affecting seasonal demand. Market shares also fell from 6.9% to 6.7%, indicating competitive challenges and weaker consumer engagement in the region. 

Valuation Methodology: Price/ Earnings Approach

Share Price Chart  

One-Year Technical Price Chart (as of August 19, 2025). Source: REFINITIV, Analysis: Kalkine Group

Conclusion

The financial performance of Associated British Foods reflects notable challenges, particularly in its Sugar and Retail divisions. The Sugar segment’s shift from a £125 million profit to a £16 million loss highlights ongoing difficulties, driven by low European sugar prices and operational issues in key markets like Spain and the UK. Recovery appears uncertain given the slow market rebalancing and regulatory uncertainties surrounding Vivergo’s bioethanol operations. Meanwhile, Primark’s UK and Ireland sales declined by 4%, with a sharper 6% drop in like-for-like sales, signaling weaker consumer demand and competitive pressures. The reduction in market share from 6.9% to 6.7% suggests that the retailer is facing challenges in maintaining its position in a cautious spending environment.

 ABF appears overvalued. For conducting the valuation, the following peers have been considered: Anpario PLC (LSE: ANP), Hilton Food Group PLC (LSE: HFG), etc

Given its current trading levels, the recent strategic investments and partnerships, relative valuation, and associated risks, it is prudent to exit the stock at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the Current Market Price of GBX 2,313.00 as of 19 August 2025 at 11:11 AM GMT + 1.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 19 August 2025. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and/or technical analysis taking into consideration both short-term and long-term scenario.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’