Primark's leap into home delivery was overshadowed as investors focused on a ballooning sugar business loss forecast for 2027.
Associated British Foods (LSE: ABF) shares fell around 7% on Thursday even as the group said full-year earnings would come in slightly ahead of expectations, after it flagged a sharp widening of losses at its sugar division and unveiled plans for Primark to launch home delivery in Great Britain.
The share price fall was driven chiefly by sugar, where ABF said this year's operating loss would land towards the top of its previously guided £25m-£60m range, hit by weak European prices, higher gas costs, onerous contract provisions and a poor UK beet harvest following the summer's heat and dryness. Far more alarming to the market was guidance that the loss could balloon to between £70m and £170m in 2027, prompting the group to cut its UK sugar footprint from four processing sites to three.
Group adjusted operating profit is expected to be broadly in line with prior guidance, with adjusted earnings per share coming in slightly ahead, while the planned demerger of Primark from ABF's food operations remains on track for completion in December 2027. At Primark, full-year sales are expected to rise around 2%, though like-for-like sales are set to fall roughly 2.6%, prompting the retailer to acquire an automated fulfilment centre in Sheffield as it moves into home delivery for the first time, building on its earlier rollout of click-and-collect.
Elsewhere in the group, grocery sales grew but landed slightly below expectations as a hot summer dented demand for Twinings tea, while ABF continues integrating the recently acquired Hovis bakery business. The ingredients arm delivered strong growth, offering a partial offset to the weakness in sugar and softer grocery trading.
Management struck a cautious tone on the outlook for 2027, citing pressure from consumer sentiment, inflation and rising energy costs. Investors will be watching closely for further detail on the sugar site closures and early signs of demand for Primark's new delivery service as the group works towards its planned demerger.
This report is based on Associated British Foods’s announcement and coverage by UK Investor Magazine. Company announcements can be tracked via London Stock Exchange RNS and Investegate, and the full results calendar is worth watching for the next update.
This article is for general information only and does not constitute investment advice or a recommendation to buy or sell any security. Photo: Sean Pollock on Unsplash.
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