Associated British Foods to demerge Primark by 2027 as half-year earnings fall on sugar weakness
ABF plans Primark demerger by 2027 while reporting lower earnings, with sugar business losses and weak US demand weighing on first-half performance.
UK – Associated British Foods has confirmed plans to separate its retail and food operations, as the group reported lower earnings for the first half of its fiscal year, weighed down by challenges in its sugar division and weaker consumer demand in key markets.
The company said it intends to split its fast-fashion retail arm, Primark, from its FoodCo business through a dividend demerger expected to be completed by the end of 2027. Both entities are anticipated to remain listed on the FTSE 100, with existing shareholders receiving stakes in both companies.
Following the separation, the food business will retain the ABF name, with current Chief Executive George Weston continuing as CEO of FoodCo, while Eoin Tonge will lead Primark. The transition is expected to incur one-off separation costs of £75 million, with dis-synergies projected to remain below £45 million.
Financial results for the six months to 28 February showed attributable profit declined to £445 million, down from £520 million (US$611.11M) in the comparable period last year. Group revenue stood at £9.47 billion (US$11.13B), broadly flat at actual currency but down 2% at constant exchange rates.
ABF attributed the weaker performance to several headwinds, including underperformance in its sugar business, which it said had delivered results “below our expectations” and is now projected to report a full-year loss.
The grocery division also faced weak trading conditions in the United States, reflecting softer consumer demand.
Retail performance provided some offset, with Primark sales rising 2% on the back of new store openings, improved like-for-like sales, and increased market share in the United Kingdom.
However, gains were partly offset by weak consumer confidence in Europe, declining demand for US oils and bakery ingredients, and falling European sugar prices.
Commenting on the results, Weston said: “We knew the first half of this financial year was going to be challenging and that’s borne out in our financial results. However, we still expect improved Group performance in the second half.”
He added: “Our Grocery and Ingredients businesses performed as we had expected them to, with our US businesses impacted by weak consumer demand. Our international Grocery brands delivered good sales growth and are positioned for a stronger profit performance in the second half. In Sugar, the results were below our expectations and given the current market conditions, we are more cautious on the outlook.”
For the full year, ABF reported a nearly 30% drop in net profit to £1 billion and maintained its reduced guidance, except for sugar, where it now anticipates a loss.
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