AB Foods cuts guidance for sugar unit as H1 profits drop

(Sharecast News) - First-half profits at Associated British Foods fell by a tenth with sales slightly behind last year, as growth in retail and food ingredients was offset by a "frustrating" performance in the sugar division. In sugar, persistently low European sugar prices and struggles at its loss-making UK bioethanol business, Vivergo, have weighed on profits so far this year, while challenges in Tanzania (which saw high levels of sugar imports in 2024) and South Africa (impacted by drought) are hit operations.

While all other guidance was unchanged, the conglomerate said it now expects to post full-year adjusted operating loss of £40m for the sugar business, compared with the November target for a profit of £50-70m.

"These results reflect a robust performance in four of our five divisions. I am frustrated with the results in our Sugar business, but we are clear on what needs to be done by way of operational and regulatory solutions to improve financial performance," said chief executive George Weston.

Group adjusted pre-tax profit totalled £818m in the 24 weeks to 1 March, down from £911m the year before, though headline pre-tax profits - which include a £104m non-cash impairment charge related to its sugar operations in Spain, as well as currency movements - dropped 21% to £692m.

Meanwhile, revenues were 2% lower than last year at £9.51bn but flat if currency movements are excluded.

The retail business, which includes Primark, grew sales by 1% at constant currency to £4.47bn, as solid growth in the US, Spain, Portugal, France, Italy, and Central and Eastern Europe made up for declines in the UK and Ireland. Ingredients sales improved by 2% at constant currency to £1.03bn.

However, revenues in the sugar division were down 4% at constant currency at £2.0bn, while the grocery division reported no sales growth at £2.09bn, as decent growth from brands like Ovaltine, Patak's and Blue Dragon were offset by lower sales in US oils and the Allied Bakeries subsidiary.

The interim dividend was unchanged at 20.7p per share.