Sugar Drags ABF Profits
AB Foods warns profits to fall as sugar business weakens, despite mixed Primark sales.
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Key Points
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AB Foods' shares slid about 2.4% to 1,938p, leaving them around 10% lower for the year up to that point.
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Primark’s US footprint increased to 41 stores after three new openings, with its first Manhattan store opened in May and cited as having started strongly.
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Continental Europe contributed to the weakness, with Primark’s like-for-like sales down 3.6% in the quarter, while UK LFL was flat and US LFL rose 16%.
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Analyst commentary highlighted the quarter as 'mixed,' with Jefferies describing it as a 'mixed Q3' and noting Primark’s performance appeared 'optically-better' within the group context.
Associated British Foods warned on Tuesday that full-year profits will fall below last year's levels, dragged down by mounting losses in its sugar arm MarketScreener. The company now expects its sugar division to report an adjusted operating loss of between £25 million and £60 million, blaming lower European sugar prices, soaring gas costs, and disruption in Africa Guru Focus.
Shares in ABF slid 2.4% to 1,938p on the news, leaving the stock roughly 10% lower for the year Wimbledon Guardian. The company's flagship retail chain, Primark, posted mixed results — total sales rose 4% to £2.9 billion, but like-for-like sales fell 2.2% over the 16 weeks to June 20 Fashion United.
Middle East Conflict Drives Sugar Division Into the Red
ABF's sugar arm is the heart of the problem. Gas prices have surged because of the Middle East conflict, pushing the company's expected energy costs to 105p per therm — up sharply from an earlier forecast of 75p Wimbledon Guardian. That spike makes it far more expensive to refine sugar, eating into margins at a time when European sugar prices are already low due to oversupply.
African operations are adding to the pain. Heavy rain in Tanzania caused production delays at a new factory, compounding the pressure Guru Focus. The agriculture segment also slid, with revenue dropping 13% to £347 million, hit by lower demand for compound animal feed. Together, these headwinds pushed analysts to cut their consensus forecast for group adjusted operating profit to around £1.55 billion, down from £1.73 billion last year.
Primark's Manhattan Moment Can't Mask Europe's Slump
Primark's headline number looked decent — total sales up 4% to £2.9 billion — but the growth came almost entirely from new stores, not from existing ones selling more Fashion United. Like-for-like sales, which strip out the effect of new openings, fell 2.2%. Continental Europe was the weakest spot, with like-for-like sales down 3.6%, reflecting low consumer confidence in key markets like Germany and France.
The US was the standout bright spot. Sales jumped 16%, powered by three new store openings that brought Primark's US total to 41 stores MarketScreener. The company opened its first Manhattan location in May, and ABF said it had started strongly. The UK, meanwhile, was flat on a like-for-like basis, with total sales up just 1% — a sign that the home market is close to saturation for now.
Analysts Call It 'Mixed' as Demerger Plan Stays on Track
Jefferies described the quarter as a "mixed Q3," noting that Primark's results looked "optically better" only because new stores padded the total sales figure MarketScreener. CEO George Weston pushed back on the gloomy read, calling the quarter a "resilient trading performance" and pointing to Primark's ability to gain market share even as the wider clothing market struggles Fashion United.
Despite the noise, ABF held firm on its plan to spin off Primark from its food businesses before the end of 2027 Business of Fashion. The demerger is designed to let investors value Primark as a standalone retailer and the food arm as a consumer staples business — two very different types of company. Some analysts say the sugar arm's volatility is itself the strongest argument for getting the split done quickly.
Group Revenue Holds Up, But the Profit Picture Is Darker
Across the whole group, revenue reached £5.3 billion, up 3% on actual exchange rates but flat when currency swings are stripped out MarketScreener. The Grocery division was a quiet winner, rising 5% to £1.04 billion, led by brands like Twinings and Ovaltine. The Sugar arm managed 4% revenue growth to £451 million — but revenue growth means little when costs are rising faster.
ABF said there was no change to Primark's guidance for the full year, and the group's overall outlook remains unchanged Wimbledon Guardian. But the profit warning is real: adjusted operating profit and earnings per share for the year will both come in below last year's levels. The next major test comes in September, when ABF is due to release its full-year preliminary results.
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