JPM sees volume/pricing trade-off amid weak demand in focus for European Staples in H2
29/08/2024 11:00
** After a mixed H1 for European Staples, focus in H2 will
be on the balance of volumes recovery versus easing pricing and
accelerated promotion and marketing, as well as demand risks in
U.S. and China, J.P. Morgan says
** It flags that the faster-than-expected normalisation in
pricing is weighing on revenue growth while consumer demand also
shows signs of strains in major markets, U.S. and China
** However, the brokerage notes evidence of volume recovery
in food, ingredients, beer, and hygiene, despite the hit from
bad summer weather
** JPM expects the sector's adjusted 2024 EPS growth to be
led by Ingredients at 17% and Beers at 10%, Food/Household and
Personal Care (HPC) and Soft Drinks to see 7%, and Spirits still
weak at -7%
** It remains positive on Beer, as the sub-sector offers the
best combination of EPS growth at reasonable valuation, while
still being cautious on Spirits given risks of further EPS
downgrades
** JPM downgrades UK consumer goods group Reckitt Benckiser
RKT.L to "neutral" from "overweight" following a disappointing
momentum on the core business, as sale of non-core assets will
take time and has an uncertain outcome on value realisation
** The broker favours companies with building volumes
momentum and cost tailwinds to margin with valuation support
such as "overweight"-rated Unilever ULVR.L , Danone DANO.PA ,
Kerry KYGa.I , Symrise SY1G.DE , Anheuser-Busch Inbev
ABI.BR , Heineken HEIN.AS , Puig PUIGb.MC , and Beiersdorf
BEIG.DE
(Reporting by Marta Frąckowiak)
((marta.frackowiak@thomsonreuters.com))