ABN Amro has given European food producers a boost by saying that it expects solid top-line growth from the sector in 2007.
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In a research note, the investment bank said that company margins should benefit from a less hostile input cost environment. ABN Amro reiterated its ‘underweight’ sector rating.
The bank’s analysts believe that whilst company values are high, there is a potential for a wave of M&A activity, because balance sheets are strong and private equity cash is a positive.
Within the sector, ABN Amro is most positive about Nestle, which it upgraded from “hold” to “buy” and Danone, which has a “buy” rating.
However, it downgraded Associated British Foods, on the back of near-term news flow, and Tate & Lyle to “hold” from “buy” reflecting valuation.
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