Associated British Foods cuts sugar profit outlook as Primark sales weaken ahead of split

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ABF trims profit, Primark slows

Highlights

Associated British Foods expects its sugar division to post up to a £60 million operating loss in 2026, citing higher gas costs at 105p per therm versus the previous 75p expectation.
Sugar sales declined 4 per cent in the third quarter to £451 million due to weaker European demand and production delays in Tanzania, while Primark saw like-for-like sales fall 2.2 per cent.
ABF maintained flat group sales at £5.3 billion for the quarter, confirmed plans to demerge Primark by end-2027, and shares fell about 2 per cent Wednesday.

Sugar outlook worsens on higher gas costs

As reported by Financial Times, Associated British Foods has lowered guidance for its sugar business after higher gas prices raised refining costs following the closure of the Strait of Hormuz earlier this year.

The company says the duration and severity of the Middle East conflict leaves it expecting to pay 105p per therm for gas next year, up from an earlier expectation of 75p. It now expects its sugar division to post an operating loss of as much as £60 million in 2026, compared with previous guidance for a £25 million loss.

Sugar sales fall 4 per cent in the third quarter to £451 million, mainly because of weaker demand in Europe as consumers cut back, while rain-related production delays at its new Tanzania factory also weigh on performance. Chief executive George Weston says he expects conditions to improve as European sugar beet producers reduce output to help rebalance supply and demand.

Primark demand softens as demerger plans continue

Primark sales fall 2.2 per cent on a like-for-like basis in the third quarter, with continental Europe remaining a particular weak spot as sales in the region decline 3.6 per cent. Even so, the retailer reiterates its expectation of an operating profit margin of about 10 per cent for the full year.

At group level, quarterly sales are flat at £5.3 billion, and ABF repeats that full-year operating profit and earnings per share are expected to decline. Shares fall about 2 per cent on Wednesday morning, while Barclays analyst Matthew Clements says the sugar downgrade is tough to digest and distracts from what he describes as a decent Primark result.

ABF announced in April that it would separate Primark by the end of 2027, in a move expected to rank among the largest FTSE 100 demergers. The group is pursuing the split to address what is seen as a conglomerate discount affecting a business that spans products from tea bags to animal feed.

In our earlier coverage of Associated British Foods’ 2026 outlook, we noted that the group expected lower adjusted operating profit and EPS as energy and geopolitical risks pushed up gas cost assumptions and weighed on the sugar division. The same update reiterated that ABF remains on track to spin off Primark before the end of 2027, as investors continue to assess the split amid ongoing margin pressure.

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