Associated British Foods shares slid after the conglomerate cautioned on the outlook for its sugar and grocery units, ahead of the planned split of its food operations and fashion arm Primark.
Shares in AB Foods fell around 10% in early morning trading Thursday, taking the stock's year-to-date loss to nearly 15%.
AB Foods, home to the Twinings tea and Patak's spices, said it foresees an adjusted operating loss for its sugar unit in the year to September 2027 to be in the range of 70 million to 170 million pounds ($94.8 million-$230.3 million), with losses deepening compared with what it expects for the current fiscal year.
For the year ending Saturday, AB Foods anticipates an adjusted operating loss for its sugar business toward the higher end of its guidance range of between 25 million and 60 million pounds, mainly due to an increase in contract provisions.
The company said weather phenomenon El Nino, significantly higher gas costs, currency movements and production levels in Africa could influence the operating loss of the unit in the 2027 fiscal year. In Europe, the company said the sugar market will likely stay in a short-term surplus due to high inventory levels carried over from 2025.
AB Foods is in the process of splitting its sugar-to-shirts conglomerate into two--separating its retail business housing fast-fashion brand Primark from its food operations. The move is expected to be completed in December next year, it said.
Sales at Primark--the group's largest business--are expected to grow 2% in the fourth quarter of fiscal 2026, with store openings offsetting an estimated 3% decline in like-for-like sales due to a challenging consumer environment in most markets, AB Foods said.
For fiscal 2027, AB Foods said it would focus on driving like-for-like sales growth at Primark, and that new space additions in Europe, the U.S. and its franchise markets would contribute to its top-line growth.
The company's foods business---encompassing grocery, ingredients, sugar and agriculture---has historically been less favored by investors than its retail arm, and the company has contended with a difficult sugar market this fiscal year, which has weighed on results.
AB Foods also tempered the outlook for its grocery business for fiscal 2026, projecting an adjusted operating profit to be slightly below its prior forecast. It had previously expected a moderate decline compared with fiscal 2025, when the grocery unit posted an adjusted operating profit of 478 million pounds.
For fiscal 2027, the company forecast a slight improvement in its grocery adjusted operating profit due to its recent acquisition of bread maker Hovis.
A long hot summer reduced demand for Twinings tea, and its Ovaltine milk flavoring product was affected by changes to a new distribution model in Thailand.
In its agriculture segment, AB Foods said it decided to exit its U.K. compound feed business, selling two of its ten mills. It plans to determine the future of the remaining mills by the end of 2027.
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