Shore Capital sees little upside at AB Foods on continued "sugar woes"

8th Sep 2014 10:30

Ongoing troubles at Associated British Foods' (ABF) sugar business continue to "hold back progress" at the company, according to Shore Capital which kept a 'hold' rating on the stock.ABF's pre-close update on Monday confirmed that adjusted earnings per share (EPS) for the year to 13 September would be ahead of last year.The company said that growth in the grocery and Primark divisions and improvements in ingredients will offset low sugar prices and a £50m hit from currency movements.With the firm also citing a reduced tax rate and lower financing costs, as well as strong margins at Primark, Shore Capital analysts Darren Shirley and Clive Black said they expect to "nudge up" their full-year EPS forecast of 103.3p by 1-3p."There is no doubt that ABF is a high quality business, and that Primark is currently one of the world’s most potent apparel retailers, steadily building market leading positions across many of its European operations and with excitement of the US to come [next year]," Shirley and Black said."However, despite the expectation of tweaks to forecasts we cannot ignore the fact that sugar woes continue to hold back progress at the group level."As such, the analysts kept their cautious view on the stock, which trades at a "demanding" 27.5 times earnings multiple on next year's estimates.They said: "We struggle to see upside on a six-month view, and potentially longer, we therefore reiterate our 'hold' recommendation."The stock was 5.3% lower at 2,756p by 11:00.