Sugar warning dents shares in Primark-owner AB Foods

By James Davey

LONDON (Reuters) -Primark owner Associated British Foods on Tuesday reported a 10% fall in first-half profit, reflecting a weak performance from its sugar business which also saw its full-year outlook slashed, sending the group's shares down 8%.

AB Foods, which also owns major grocery, agriculture and ingredients businesses, maintained annual guidance for its key Primark clothing unit - "low single digit" sales growth and an adjusted operating profit margin broadly in line with the 11.7% achieved in 2023/24.

It said sales growth at Primark, which contributes about half of group revenue, would be driven by new stores in continental Europe and the United States, offsetting weaker sales in the UK and Ireland.

AB Foods CEO George Weston told Reuters Primark was committed to expansion in the U.S. despite President Donald Trump's erratic approach to tariffs.

Total sales at Primark, whose boss Paul Marchant resigned last month over inappropriate behaviour, rose 1% to 4.5 billion pounds ($6.0 billion) in the six months to March 1, though like-for-like sales in the UK and Ireland fell 6.0% with the business losing market share.

"While we continue to assume our trading in the UK remains challenging in H2 2025, there have been some early signs of improvement in recent weeks," the group said.

Weston said Primark's UK like-for-like sales had been positive in the second half so far.

However, the outlook for the sugar business was grim, with the group forecasting a full-year adjusted operating loss of up to 40 million pounds, reflecting persistent low European sugar prices, a loss at its UK bioethanol business, Vivergo, and challenges in Tanzania and South Africa.

The group was previously forecasting sugar to make a 2024/25 profit of up to 75 million pounds. It made 199 million pounds in 2023/24.

It said it was close to completing a review of its Spanish sugar business Azucarera, and was considering mothballing or closing the Vivergo plant unless there were changes to UK bioethanol regulations regarding imports.

The group is also evaluating "strategic options" for its loss-making Allied Bakeries business after it lost a contract with supermarket Tesco.

Weston was dismissive of a recent media report which suggested the group was considering spinning off Primark.

AB Foods maintained guidance for its grocery business, which also includes brands such as Twinings tea, Jordans cereals and Ovaltine drinks, and for its ingredients and agriculture divisions.

First half group adjusted operating profit, its preferred profit measure, was 835 million pounds, on flat revenue of 9.5 billion pounds on a constant currency basis.

($1 = 0.7455 pounds)

(Reporting by James Davey. Editing by Paul Sandle and Mark Potter)