Associated British Foods has warned this morning of deepening losses in its sugar business as it wrestled with a number of challenges.
The group downgraded its outlook for the division and said it now expected an adjusted operating loss in the range of £25m to £60m.
ABF highlighted numerous issues in the business, including subdued European sugar prices and higher gas prices as a result of the conflict in the Middle East. It also faced issues with its Tanzanian sugar mill and anticipated the impact of a potential devaluation to the Malawian currency.
ABF also expected a further deterioration in the sugar results for the 2027 financial year from the £60m operating loss at the upper end of its new guidance for this year. There remain significant unknown factors that could affect the results, both positively and negatively, including weather impacts from El Nino.
The challenges in the sugar division weighed heavily on the group’s third quarter trading update.
Group revenues were flat at £5.3bn as a 3% rise in Primark sales, a 1% lift at grocery and 3% increase at ingredients was offset by declines in sugar and the agriculture division.
“The group delivered a resilient trading performance in the third quarter,” CEO George Weston said. “While the retail environment remained challenging in most markets, Primark continued to strengthen its customer proposition, including new product launches, a sharper focus on price and increased investment in marketing, particularly digital.
“We are making good progress and there is more to come. Grocery and ingredients delivered solid results. In sugar, the duration and severity of the Middle East conflict have increased gas price expectations for next year, which has impacted our European profit outlook. Aside from sugar, our full year outlook for the group is unchanged.
“Across the group, we continued to take targeted actions and make investments to drive performance. Several long-running projects have either recently been completed or are nearing completion, reinforcing our confidence in the group’s long-term growth prospects.”
Earlier this year, ABF announced a demerger of Primark from its food business, which is on track to happen by the end of 2027.
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