Primark's Parent Company AB Foods Sees Shares Slide on Sugar Business Profit Warnings

Associated British Foods' shares dropped following a warning that the return to profit growth for its sugar division will be delayed beyond what was first expected.

The share price dropped by 7.15%, standing at 2,079 pence during early European trade, thus making it one of the biggest decliners in the FTSE 100 index. Year-to-date, however, the stocks have shown an increase of 1.7%.

On Tuesday, the company stated that it currently anticipates the division will incur an adjusted operating loss of around £40 million ($53.8 million) for the entire fiscal year 2025. Previously, they had forecasted operating profits within a range of £50 million to £75 million.

The ability of its biofuel operation Vivergo – part of the company’s sugar segment – to turn profitable is being compromised because of how regulations concerning bioethanol are being implemented.

"We are engaged in productive talks with the UK government to examine regulatory possibilities for enhancing our stance," the statement read, further noting that the group might choose to idle or shut down the Vivergo facility if needed.

Additionally, the firm is nearing completion of an operational review for its Spanish unit, Azucarera, because of the decline in market circumstances.

Panmure Liberum analysts Anubhav Malhotra and Wayne Brown stated in a research report that separating the unpredictable sugar division into an independent unit could enhance the attractiveness of AB Foods as an investment opportunity.

Regarding the main focus of the group known as Primark, the company anticipates modest single-digit growth in sales over the course of this year. They aim to maintain an adjusted operating profit margin similar to what was achieved last year. Despite expectations of ongoing difficulties in the UK market during the latter part of the year, recent weeks have shown initial indications of progress.

This perspective takes into account the integration of effects from U.S. tariffs during the latter part of the year, as stated by the corporation, considering the current operational climate filled with substantial uncertainties. Nonetheless, it asserts readiness for sustained success over the longer run.

In the meantime, the company announced a pretax profit of £692 million for the six-month period ending March 1st. This represents a decrease of 21%, based on current exchange rates, from the same timeframe last year and falls short of analysts' predictions of £828 million, as per a survey conducted by Visible Alpha.

The revenue dropped by 2% compared to the previous year, totaling 9.51 billion pounds, which did not meet the analysts' predicted revenue of 9.63 billion pounds.

"I'm disappointed with how things are going in our sugar division, however, we have a clear understanding of the operational and regulatory steps required to boost our financial outcomes," stated Chief Executive George Weston.

Primark experienced a dip in like-for-like sales by 2.5%, largely attributed to difficult conditions in their domestic market and in Ireland. According to AB Foods, "We've established a distinct plan for opening new stores in expanding markets, with expectations that these locations will account for approximately 4% to 5% of Primark’s overall yearly sales growth over the coming period."

Send your message to Andrea Figueras. andrea.figueras@wsj.com