Associated British Foods warns sugar business will remain loss-making until 2028 

UK – Associated British Foods (ABF), the owner of Primark, has warned that its sugar business is expected to remain loss-making for at least the next two financial years as rising gas prices and challenging market conditions continue to weigh on the division’s performance. 

In its third-quarter trading update, the company said higher gas price expectations linked to the conflict in the Middle East have further pressured the outlook for its European sugar operations, prompting management to forecast a deeper operating loss over the coming years. 

The group now expects its sugar division to report an adjusted operating loss of between £25 million and £60 million (US$33 million to US$79 million) in the 2025/26 financial year, followed by a further deterioration in 2026/27. The business recorded a £2 million operating loss in 2024/25. 

ABF said, “The performance of our sugar business is a priority area for management,” adding that it expects to take further action to lower its cost base, particularly across its European operations. 

Third-quarter revenue from the sugar business declined 4% on a constant currency basis. The company attributed the decline to lower average selling prices in Europe, reduced sales volumes in Tanzania and increased sugar imports into South Africa, which affected market performance. 

Despite the challenges facing its sugar operations, ABF confirmed that plans to separate Primark from its food businesses remain on schedule. The company reiterated that the demerger is expected to become effective before the end of 2027, following its announcement in April. 

Primark continued to deliver revenue growth during the quarter, with sales increasing 3%. However, like-for-like sales declined 2.2%, which the company attributed to a challenging retail environment across most of its markets.  

The retail division generated revenue of £2.92 billion during the quarter, representing a 4% increase from the previous year. 

Elsewhere, revenue from ABF’s grocery division, which includes brands such as Ovaltine, Ryvita and Twinings, rose 1%. The company said growth was partially offset by weaker sales of its U.S. oils business, reflecting reduced spending by Hispanic consumers. 

Overall, group revenue remained flat during the third quarter, while the company maintained its full-year outlook outside the sugar business.  

ABF continues to expect adjusted operating profit and adjusted earnings per share to remain below the previous financial year, with analysts forecasting group adjusted operating profit of approximately £1.55 billion for the year ending September 2026, compared with £1.73 billion in 2024/25. 

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