AB Foods shares slide as Primark and sugar weigh on outlook

(Sharecast News) - Associated British Foods reported a weaker performance in its sugar division and muted growth at Primark on Wednesday, overshadowing otherwise resilient trading across the board. AB Foods traded lower at the bell after announcing that it will close its Vivergo bioethanol plant and restructure its Spanish sugar business, triggering impairment charges of around £200m.

The sugar unit, which makes up roughly 11% of group sales, was now expected to post a £40m annual loss, well below previous forecasts of up to £75m in profit, due to lower European sugar prices and higher beet costs.

AB Foods said Primark's total sales growth for H2 was expected to be around 1%, with like-for-like sales down 2% year-on-year. UK and Ireland sales rose 1%, lifting market share from 6.6% to 6.8%, while US sales jumped 23%, supported by four new store openings. Sales in Spain and Portugal rose 2%, but France and Italy declined 4% amid weaker consumer demand. Central and Eastern Europe saw a 9% uplift, while Northern Europe fell 2%.

However, Primark, AB Foods' largest division, also weighed on sentiment, revealing that while UK and US sales improved, overall growth was modest and like-for-like sales were expected to decline 2% in the second half and H2 margins were also anticipated to be lower due to the phasing of one-off items.

In food, grocery sales were flat, with growth in Twinings and Ovaltine offset by weaker performance in Allied Bakeries and US oils.

The FTSE 100-listed group added that it has made "substantial strategic progress" and that it now expects to benefit from recent actions and continued investment. However, ABF warned that the consumer environment remained uncertain heading into FY26.

Interactive Investor's Richard Hunter said: "As ever, the main focus is on the group's jewel in the crown, Primark, which is responsible for 47% of overall revenues. However, growth has been hard to come by and has come up against some tough comparatives from the prior year. In addition, cautious consumer sentiment is already beginning to weigh on prospects, as had largely been predicted following the measures announced in the Budget, which were seen as being particularly harmful to the retail sector.

"The shares are currently being severely punished as a result of the headline difficulties in Primark and Sugar in particular, and the vertiginous fall at the open will do little to improve prospects for the market consensus."

As of 0835 BST, AB Foods shares were down 8.97% at 2,040p.

Reporting by Iain Gilbert at Sharecast.com