Shares in Associated British Foods (ABF) plunged 9% earlier this week after the global consumer conglomerate posted a slide in first-half profit and downgraded full-year guidance for its Sugar business.
Results for the six months to March 2025 showed a 21% drop in pre-tax profit to £692 million as the Sugar business delivered a £16 million loss.
The volatile Sugar arm is now expected to make a loss of up to £40 million this year against previous expectations of a £50 million to £70 million profit.
The outlook for Sugar has worsened, mainly due to lower European sugar prices and losses in Vivergo, the UK bioethanol business, but also due to challenges in Tanzania due to the overhang of high levels of sugar imports in 2024 and in South Africa due to drought.
Associated British Foods’ chief executive George Weston conceded he was ‘frustrated’ with the results, but insisted management was ‘clear on what needs to be done by way of operational and regulatory solutions to improve financial performance’.
Investors also took issue with market share erosion at Primark, the jewel in the Associated British Foods crown, where performance in the UK and Ireland continues to disappoint.
Primark’s constant-currency sales crept up 1% to £4.5 billion in the half amid growth in Europe and the US, while operating profit grew by 8% to £540 million as the cut-price clothing chain’s margins expanded from 11.3% to 12.1%.
Worryingly, however, UK and Ireland like-for-like sales fell by 6% in a ‘challenging’ market with shoppers remaining cautious, while Kantar data showed Primark’s share of the UK clothing market reduced from 6.9% to 6.7% over the 24 weeks to 2 March.
‘While we continue to assume our trading in the UK remains challenging in H2 2025, there have been some early signs of improvement in recent weeks,’ insisted Associated British Foods, which analysts at Jefferies read as a reiteration of flat margin guidance for the year.
Panmure Liberum noted various restructuring and strategic reviews have been announced for the struggling Azucarera Spanish sugar, Vivergo bioethanol and Allied Bakeries businesses.
The broker added: ‘Today’s results give further credence to our argument that a sale or carve out of the volatile Sugar business into a separate entity would make the ABF investment case more compelling.’
AJ Bell investment director Russ Mould commented: ‘While the company is sticking with its full-year guidance for the unit, Primark seems to be underperforming its peer group of late. This is worrying given warm temperatures should have increased footfall to Primark’s stores. This hasn’t escaped the attention of investors and will be causing concern for management too.’
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