Trading trends at cut-price clothing chain Primark and the synergies promised by a planned merger of Kingsmill-owning Allied Bakeries and Hovis will be in focus when Associated British Foods (ABF) updates the market on 10 September. The FTSE 100 foods-to-fashion conglomerate’s shares are down 13% on a one-year view with discount fashion arm Primark finding life tougher on home turf and its sugar business also struggling.
However, Associated British Foods continues to address loss-making businesses and has decided to close UK bioethanol unit Vivergo after the UK Government refused to fund a rescue; the plant was dealt a killer blow by Keir Starmer’s trade deal with the US which scrapped tariffs on American ethanol imports. In time, Vivergo’s closure should benefit the profitability of the currently loss-making sugar arm.
Primark has continued to generate good growth in Europe and the US, but continued consumer caution drove 4% sales declines in both the UK and Ireland in the first half ended 1 March 2025. As such, investors will want reassurance that Primark’s operating margin outlook hasn’t deteriorated and that the value-oriented retailer remains on track to deliver low-single digit sales growth for the full year.
Associated British Foods’ management is also likely to outline how it plans to get the best out of sliced bread businesses Kingsmill and Hovis, having agreed to buy the latter from private equity player Endless for an undisclosed sum in a deal which faces regulatory scrutiny.
On 15 August, Associated British Foods insisted the Hovis acquisition will ‘combine the production and distribution activities of the two businesses, driving significant costs synergies and efficiencies, to create a profitable UK bread business that is sustainable over the long term’. Panmure Liberum says a transaction ‘would likely attract regulatory scrutiny’, but the broker expects the regulator to ‘take the view that, in the absence of a merger, only one of the two companies would survive, thereby reducing competition in any case.’
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