ABF warns of deeper sugar losses as European prices, costs pressure business
Weak European sugar prices, higher gas costs and lower UK beet yields are weighing on ABF’s sugar outlook, while its Grocery and Ingredients businesses continue to grow.
UK – Associated British Foods (ABF) expects its sugar business to post an adjusted operating loss at the higher end of its previously forecast range in fiscal 2026, as weak European sugar prices, higher gas costs and lower UK beet yields continue to pressure the division.
The British conglomerate previously forecast an adjusted operating loss of £25 million to £60 million ($33.9 million to $81.3 million) for the sugar business. Sales and profitability declined in the fourth quarter as average selling prices in Europe fell below year-earlier levels.
ABF also recognised provisions for loss-making contracts and cited continued low European sugar prices, higher gas costs and lower yield expectations for the 2026-27 UK beet crop following prolonged hot and dry weather.
The company said high sugar inventories carried over from 2025 could leave the European market in surplus in the short term, despite an expected reduction in regional production. It added that recent improvements in European and global sugar prices could provide support in later years but were unlikely to ease immediate pressure on the business.
ABF expects grocery sales to grow by a mid-single-digit percentage in the fourth quarter of fiscal 2026. The company said its Grocery and Ingredients businesses delivered growth during the quarter, although individual brands faced mixed trading conditions because of weather, distribution changes and commodity-market pressures.
Twinings recorded good growth in Australia, while sales in the UK and Europe were weaker than expected. ABF attributed the decline partly to the prolonged hot summer, which reduced demand for hot tea. Ovaltine growth was also affected by sales timing in Thailand as the business moved to a new distribution model.
“Grocery and Ingredients both delivered good growth in the quarter,” chief executive George Weston said in ABF’s September trading update.
Despite the growth, ABF expects full-year adjusted operating profit from Grocery to be slightly below its previous forecast, mainly because of short-term effects on Twinings and Ovaltine.
ABF completed its acquisition of Hovis in July and said integration of the bread manufacturer’s production and distribution network with its existing bakery operations was progressing quickly. Hovis has been combined with Allied Bakeries, the ABF business behind Kingsmill, Allinson’s and Sunblest.
ABF expects the combined bakery operation to deliver meaningful cost savings, which it plans to use to support innovation and establish a sustainably profitable business.
For fiscal 2027, Grocery adjusted operating profit is expected to be slightly ahead of 2026. The forecast includes a one-off effect from consolidating Hovis losses during its first year of ownership before planned synergies improve earnings.
Ingredients delivered stronger growth, with fourth-quarter sales expected to increase approximately 10%, supported by AB Mauri’s yeast and bakery ingredients operations and the speciality ingredients portfolio. Full-year adjusted operating profit for Ingredients is expected to remain in line with the previous forecast.
ABF is also preparing to separate Primark from its food operations through a planned demerger expected to be completed in December 2027.
The transaction would create an independent food group comprising Grocery, Ingredients, Sugar and Agriculture.
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