AB Foods weighs Primark spin-off as profit falls on weak sugar performance 

UK – Associated British Foods (AB Foods) has announced that it is considering separating its Primark fashion business from its food operations after reporting a double-digit drop in full-year profit, driven by a challenging year for its sugar division. 

The company revealed that its board has been reviewing the business structure for several weeks with the goal of maximising long-term shareholder value, with findings expected by April 2026. 

The group, which owns grocery brands including Ovaltine, Twinings, and Ryvita alongside its significant sugar, ingredients, and agriculture businesses, said that the review could potentially result in a separation of Primark from its other units. Rothschild & Co is advising on the review.  

CEO George Weston noted that while no decision has been made, the announcement suggests a strong likelihood of change, though the group will also assess whether maintaining the current structure would be more beneficial. 

Primark, which AB Foods financed from its first store in Dublin in 1969, has grown to 476 locations across 18 countries, generating nearly £9.5 billion in annual sales.  

The retailer accounts for around half of the group’s revenue and a majority of its adjusted earnings, supported by continued expansion in the United States.  

However, the company acknowledged that the food business remains less understood by markets despite its long-term potential. 

The strategic review comes as AB Foods reported a decline in profit and revenue for the financial year ended September 13. Primark experienced a slowdown in sales growth, while a difficult sugar market weighed significantly on group performance.  

European sugar prices fell sharply and remained low, affecting the company’s sugar operations, including British Sugar, acquired in 1991. 

Group pretax profit fell 26 percent to £1.41 billion, compared to £1.91 billion (US$2.19B) in the prior year. Revenue declined to £19.46 billion (US$22.36B) from £20.07 billion (US$23.06B). Overall adjusted operating profit dropped 13 percent to £1.73 billion (US$1.99B), though the figure surpassed the £1.66 billion (US$1.91B) forecast by analysts. 

Primark’s adjusted operating profit rose 2 percent to £1.13 billion (US$1.298B) for the year, but the company cautioned that margins are expected to decline in the year ahead as it increases investment amid subdued consumer sentiment.  

Retail sales inched up to £9.49 billion (US$10.90B) from £9.45 billion (US$10.86B), with constant-currency revenue growth slowing to 1 percent versus 6 percent the previous year. 

Weston stated that while markets have historically valued Primark more highly, AB Foods’ food operations hold significant growth potential, reinforcing the importance of the structural review as the group navigates evolving market conditions. 

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