AB Foods Under Pressure Following Profit Warning
"Now we've had a number of reports out for UK businesses; there's a profit warning too from AB foods today. AB food shares are down quite a lot this morning on the back of that profit warning. AB Foods consists of Primark and a range of food businesses including brands like Ravita Crackers and Kings Meal Bread. It was noted that while Primark is struggling in continental Europe and the US, it is doing a little better in the UK. The profit warning comes at a pivotal time as the company is considering splitting Primark from the rest of the business, with a decision expected by April."
The discussion on AB Foods centers on a profit warning that has led to a sharp decline in its share price. The report emphasizes the struggles of Primark internationally and notes an upcoming decision regarding the potential split of Primark from the rest of the company, signaling near-term uncertainty and bearish sentiment.
Conditional Buy Opportunity in CALM on Price Dips
"The best time to buy commodity cyclicals is when it looks ugly, not when it looks great with a 10% dividend yield. So if we go to a gross profit of 10% net income of zero, which was the case with lower prices, we see that the company doesn't make money. And then when people and investors capitulate when there are no dividends and you bought it for the dividend when the price is not going up and you bought it because you hoped for more avian flu or something that's the time to look at it and then wait for these unknowns that's where the upside is because if egg prices for whatever reason I cannot predict avian flu or things like that stay low it means the dividend will be cut the dividend yield will go from 10 to 1% because there is simply no profit and then it will get revalued and it might get from 80 to 40 if there is no outlook for higher cash flows and that might make it interesting. Now you're risking upside 120 if egg prices go higher again on avian flu versus downside 40 if there is over supply."
The speaker identifies CALM as an attractive long-term opportunity which becomes compelling when the stock's earnings and dividends are hit by lower egg prices. He argues that buying when the company appears to be struggling, with earnings near zero and a dividend cut imminent, offers significant upside if egg prices recover, albeit with controlled downside. The view is presented as a conditional buy, waiting for a substantial price dip – potentially once in a decade – before capitalizing on the cyclic recovery.
AB Foods Considering Primark Spin-Off
"AB Foods then is considering separating Primark from the rest of the business. It was always quite strange. The business really divided between two very different business lines. It's been long discussed by a lot of analysts that cover the company and this is being seen as quite a positive this morning. There's one interesting quote from one of the Barclays analysts saying they've been fans of pure plays and have advocated for a split for quite a long time."
AB Foods is evaluating a spin-off of Primark, a move that many analysts consider positive because Primark accounts for the majority of the company's profits and could achieve a cleaner valuation independently against retail peers.