Associated British Foods shares were sharply higher on Tuesday as investors cheered stronger Primark sales amid the cost of living crisis.

Associated British Foods’ sugar and food business often plays second fiddle to Primark in the eyes of investors, and looking at today’s update, it is easy to see why.

Although AB Foods enjoyed growing sales and operating profit in the grocery and ingredients business, the Primark unit accounted for a large proportion of the group’s 17% increase in operating profit to £1,383m.

AB Foods shares were 6.7% higher at the time of writing and were by far the best performing FTSE 100 shares on Tuesday morning.

Sugar operating profit fell 27% due to crop issues and Agriculture profits fell amid tough market conditions.

Primark’s sales jumped 17% to £9bn on an actual currency basis, accounting for a little under half of the group’s £19.75bn total revenue. The company has taken the decision to pass on only a part of their input cost inflation customers, which has helped customers through the door during the cost of living crisis.

“The key Primark business has benefitted from a changing retail landscape over the past few years, especially with the demise of Debenhams and Topshop,” said Aarin Chiekrie, equity analyst at Hargreaves Lansdown.

“That’s helped sales grow 15% at Primark, up to £9.0bn for the full year, with 27 new store openings and an improved website helping Primark to ring more cash through the tills. Margins here fell slightly as the group chose not to pass the full extent of inflated input costs onto consumers in order to keep its price-sensitive customers happy amidst the current cost-of-living crisis.  

“One of ABF’s key strengths is its diversified portfolio of businesses, which includes many well-known food brands such as Kingsmill, Ryvita and Patak’s. This diversification helps to spread out risk, ensuring the company isn’t overly reliant on any one product or division.

“That’s been a benefit in recent times as unhelpful weather in the prior year dented performance at the group’s African sugar business, Illovo. But after strong pricing actions and much-improved production levels, sugar revenue soared nearly 30%. The strong financial performance means there’s plenty of room to return excess cash to shareholders, with a special dividend and new £500m buyback programme on the way.”

Persimmon shares were comfortably higher on Tuesday after the housebuilder increased their completions guidance for the year amid a slight uptick in activity.

The company said full-year completion guidance had been increased to 9,500 from 9,000 as private sales rates have improved to 0.59 over the past 5 weeks, up from 0.45 in the same period last year.

Persimmon shares were 3.8% higher at the time of writing.

Persimmon’s rally extended as the session progressed on Tuesday as investors ponder the dire situation the housebuilder is in and how much is already priced into shares. Notwithstanding a minor increase in completion guidance, Persimmon’s New Home Completions were 37% lower in Q3 2023 despite a ramping up of incentives.

“New home buyers are clearly exercising greater caution, and frankly who can blame them,” said Wealth Club’s Charlie Huggins.

“Mortgage payments for first time buyers have soared over the past 18 months. When combined with the limited availability of high loan to value mortgages and the end of the Help to Buy scheme in England, it’s no surprise that the housing market has seen a marked slowdown.

“How much worse can things get? Well, interest rates are widely considered to have peaked meaning the first interest rate cut is a matter of if not when. It can’t come soon enough for Persimmon. And it could mark the beginning of a strong recovery.

“We probably need to see a few interest rate cuts to entice first time buyers back into the housing market. But with inflation moderating that point has probably been brought forward.

“The one fly in the ointment could be house prices themselves. Prices have held up so far but this could be because there have been very few transactions. If the economy weakens further from here house prices could easily register further declines, causing further pain for Persimmon and its peers.”

The group said they see a ‘highly uncertain’ 2024 and are taking action on costs by renegotiating labour pricing and controlling material costs.

The FTSE 100 added to substantial gains on Friday as investors continued to position for the end of the interest rate hiking cycle.

A weak US jobs report poured cold water on the notion the Federal Reserve would hike again this year, and with central banks appearing to march in lockstep, it could also mean interest rates stay the same in the UK for the foreseeable future.

Indeed, after the Fed and BoE held off hiking rates last week, the weak US jobs report even sparked market chatter of rate cuts – although there is no indication either central bank has any plans to do so in the near term.

“The FTSE 100 started the week modestly higher amid growing confidence the interest hiking cycle has peaked,” said AJ Bell investment director Russ Mould.

“Weak jobs figures from the US on Friday were the latest bit of news to underpin this status and with both Bank of England governor Andrew Bailey and Federal Reserve chair Jerome Powell due to speak this week, investors will be watching closely to see if they seek to counter or reinforce this narrative.

“For now, we’re still in a world where bad news equals good news because of the implications for rates. At some point though the market will turn to the implications of a significant weakening in the economy on corporate earnings.”

The implications of softer economic conditions were evident in Monday’s trade, with housebuilders slipping back after a strong rally last week. Taylor Wimpey was down 0.4% and Barratt Developments gave up 0.3%.

UK banks were among the top risers as markets aligned behind interest rate expectations and bond yields slipped. Natwest gained 2% and Standard Chartered perked up by 3%. The two were the heaviest hit during the last round of earnings.

Scottish Mortage slipped 0.6% after full year results provided insight into the pricing of their private assets.

“Scottish Mortgage was once the market’s leading investment trust, with great clamour to own its shares, but market dynamics have shifted and having large exposure to unquoted companies went out of fashion,” said Russ Mould.

“The big fear stalking Scottish Mortgage is its unquoted holdings would see their value marked down aggressively.

“Interestingly, the shares’ discount to net asset value has narrowed somewhat since the spring, and today’s publication of first-half numbers may provide a measure of reassurance to shareholders as its net asset value fell, but only modestly.”

MicroSalt is preparing to list in London as part of its journey to improve the health of millions of people with low-sodium salt products that can help tackle cardiovascular diseases worsened by the overconsumption of salt.

At a recent UK Investor Magazine Virtual Presentation, MicroSalt founders Tekcapital alluded to multi-million dollar sales for their portfolio companies – including MicroSalt – in 2024.

The foundations for MicroSalt achieving this goal were laid this year with an extensive series of commercial developments which added to existing partnerships with leading US supermarket chains Kroger and Hannaford Brothers.

Partnerships and deals outlined in this article exclude ongoing and late-stage negotiations with large multinational food businesses detailed in MicroSalt’s admission document.

1st November 2023 – MR Williams Placement

MicroSalt inked a new deal to distribute its full SaltMe! crisps product line into MR Williams, a major convenience store distributor in the southeastern US serving customers across North Carolina, South Carolina and surrounding states, MR Williams will now offer all four SaltMe! flavours to its network of convenience store clients.

19th October 2023 – Longs Drug Stores Placement

MicroSalt secured the distribution of its SaltMe! low-sodium crisps into Longs Drugs, Hawaii’s leading drugstore chain. Longs Drugs, owned by $90bn market cap CVS Health, operates around 70 locations throughout Hawaii.

Longs Drugs was acquired by parent company CVS Health in 2008 and is one of the largest healthcare chains in Hawaii.

19th September 2023 – Weijohn Farms Partnership

MicroSalt has partnered with Weijohn Farms Group to bring its low-sodium technology to their Sorbatto Fresh hazelnut line. With the North American hazelnut market projected to grow to $3.2 billion by 2030, MicroSalt’s sodium-reduction solution allows Weijohn to meet rising demand for healthier snacks.

7th September 2023 – Patent Filed for Reducing Baking Times and Lowering Sodium Content in Baked Goods

In September, investors learned of arguably the most significant commercial development for MicroSalt this year. The company filed a new patent application for technology to reduce sodium content and leavening time in baked goods.

MicroSalt said it had recently demonstrated successful use of its proprietary low-sodium technology in developing a new reduced-sodium recipe for baked products. With demand growing globally for lowered sodium across the $500 billion worldwide bread market, MicroSalt’s innovation provides a solution for low-sodium baked goods that also enables faster, more sustainable production. The patent-pending technology adheres micron-sized salt particles onto a carrier for better distribution in dough, reducing baking times while lowering sodium content.

This breakthrough could be applied across a wide variety of baked goods to help meet evolving consumer demand for low-sodium, health-conscious alternatives.

31st July 2023 – Expansion into the Phillippines

MicroSalt demonstrated global demand for low sodium SaltMe! crisps with expansion into the Philippines market, securing new distribution deals with major retailers Healthy Options and S&R Membership Shopping.

Both retailers placed significant initial orders for SaltMe! crisps and expressed strong interest in future orders as demand grows globally for premium low-sodium snacks. With 33 stores, Healthy Options is the largest all-natural products chain in Asia. S&R operates 22 warehouse stores focused on imported premium goods, presenting major expansion opportunities throughout the Philippines.

26th June 2023 – 100+ Additional US Stores Stock MicroSalt

In June, MicroSalt announced a raft of new distribution deals with regional grocery chains in the northeastern US MicroSalt’s saltshakers were to be stocked in 51 Fine Fare stores, 8 Trade Fair stores, and 72 Big Y supermarkets in New York, New Jersey, Pennsylvania, and New England.

Fine Fare and Trade Fair stores are focused on the New York market, while Big Y operates over 70 locations across New England as the region’s second largest supermarket chain.

17th May 2023 – 400 US Stores

MicroSalt secured a major distribution expansion of its SaltMe! crisps and MicroSalt low-sodium salt shaker products into over 400 additional US retail stores. New retail partners stocking MicroSalt’s products include regional grocery chains like Brookshire Brothers and Pete’s Fresh Market, as well as natural independent grocers across the country such as Heinen’s, Dick’s Fresh Market, Zerbos, Better Health Market, and Tdych’s Marketplace.

2nd May 2023 – Fortune 500 National Retailer

MicroSalt announced a partnership with a Fortune 500 national retailer to develop and launch reduced sodium versions of the retailer’s private label snack brands.

Through the deal, MicroSalt will replace traditional salt with its MicroSalt® low-sodium alternative in several snack offerings, which will roll out to 800 of the retailer’s stores by Q4 2023.

With over 7,000 store locations nationwide, the partnership provides a major opportunity for MicroSalt to scale the availability of its sodium-reducing salt technology across a major retailer’s private label snack portfolio.

13th March 2023 – H Mart

H Mart is one of the fastest growing Asian supermarket chains in the United States. With over 97 stores across the US, H Mart has rapidly expanded since its first store opened in 1982 in Queens, New York.

As the largest Asian grocery chain in America, H Mart provides a full range of Asian and Western groceries and is known for its food halls. The deal with MicroSalt will make SaltMe low sodium crisps available in H Mart’s stores nationwide.

27th February 2023 – United Natural Foods and KeHE Distributors

MicroSalt expanded the distribution of its salt shakers through deals with two major US food distributors, United Natural Foods and KeHE Distributors. The two distributors are among the largest in the US retail food market.

United Natural Foods, Inc. (NYSE: UNFI), the largest publicly traded wholesale distributor in the US and Canada, delivers healthier food options to retail stores across both countries.

KeHE Distributors has 16 distribution centers across North America. KeHe provides exposure to a plethora of grocery stores, supermarkets, natural retailers and online eCommerce drop shippers.

6th February 2023 – US Salt

MicroSalt partnered with US Salt LLC, the leading producer of private label round can table salt in the United States. Through the agreement, US Salt will distribute and deliver MicroSalt’s innovative low-sodium salt solutions to US consumers. With control of over 90% of the US private label, round can salt market, US Salt has the potential to bring MicroSalt’s sodium-reducing alternative salts to the masses.

“US Salt is looking forward to working with MicroSalt® to help with our low-sodium initiatives. Sodium is a worldwide concern in the food industry, and we believe Rick and his team are the industry leaders that can help propel our future growth,” said Bob Jordan, Vice President of Sales & Marketing of US Salt LLC, at the time of the deal.

31st January 2023 – Giant Food of Maryland LLC

MicroSalt partnered with Giant Food of Maryland LLC (Giant), a leading supermarket chain in the mid-Atlantic region, to offer lower sodium options for customers.

As part of the agreement, Giant will carry Microsalt’s saltshakers in all of its over 160 stores in Delaware, Maryland, Virginia and Washington D.C.