ii view: AB Foods must overcome these headwinds

Second-half trading update to 13 September

• Primark's same store sales expected to be down around 2% compared to H2 last year
• Sales and profit declined significantly for Sugar business in UK and Spain
• Expects Grocery and Ingredient sales to broadly match H2 last year
• Expects Agriculture sales to rise 1% compared to H2 last year

Guidance:

• Now expects an annual loss of £40 million for the Sugar business, down from a previous profit up to £75 million
• Expects Primark’s full-year adjusted operating profit margin to broadly match last year

Chief executive George Weston said: 

"This has also been a busy period strategically, including the decision to close the Vivergo bioethanol plant, the restructuring of our Spanish sugar business, and an agreement for Allied Bakeries to acquire Hovis to create a financially sustainable UK bakeries business. Against a backdrop of continued volatility in 2026, we will start to see the benefit from our recent actions and continued investment."

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ii round-up:

Associated British Foods (LSE:ABF) operates across the five divisions of grocery, sugar, agriculture, ingredients, and retail. 

Its retail business Primark is located in the UK and Ireland, much of Europe and parts of the USA. 

Brands for its food businesses include Silver Spoon, Twinings, Ovaltine, Ryvita, Kingsmill, Allison’s, Jordans and Dorset cereals, Patak’s, Rajah’s and Blue Dragon.

The sugar business is one of the largest producers in the world with operations in the UK, Spain, Africa and China. The ingredients division is focused on yeast and enzymes.

For a round-up of this latest trading update announced on 10 September, please click here. 

ii view:

Began in 1935, the retailing and foods business today operates across more than 50 countries. Primark, and trading across countries including the UK, France, Italy, Spain and the USA, generated more revenues during the first half of 2025 at 47%. That was followed by Grocery at 22%, Sugar and Ingredients each at around 11%, and Agriculture the balance of 9%.

For investors, tough economic conditions in France and Italy meant same store Primark sales were down 2% in this latest period compared to City hopes for a fall of just 1%. Lower sugar prices continue to cast a shadow over the 2026 outlook for the division. Unseasonal weather can impact both Primark sales and sugar production, while a forecast price/earnings (PE) ratio in line with the three-year average may suggest the shares are not obviously cheap.   

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To the upside, management actions to improve performance and including the restructuring of its Spanish sugar business, are ongoing. A diversity of operations regularly sees difficulties for one area countered by positives for another. A push online now includes Click and Collect services for more than 180 UK stores, while a forward dividend yield of around 3% sits above that for both Next and M&S.

In all, and despite current challenges, this historically well managed FTSE 100 company continues to justify its place in many already diversified investor portfolios.

Positives: 

• Diversified business type and geographical footprint
• Expanding Primark store numbers

Negatives:

• Uncertain economic outlook
• Factors outside of its control like food commodity prices and currency moves 

The average rating of stock market analysts:

Hold