Associated British Foods has held firm on its guidance for Primark and most of its other business divisions for the coming year, despite ongoing uncertainty over the impact of US tariffs and a £16m loss in the group’s sugar business.
The group said its unchanged outlook – with the exception of sugar – reflects the absorption of the US tariff impact in the second half of 2025, based on the latest available information.
Revenue for the group fell by 2% over the half-year, while adjusted operating profit fell by 10% at constant exchange rates.
Outlook for this financial year is now weighed down by sugar’s £16m loss for the reporting period, which is now expected to make a loss of £40m versus previous expectations of between £50m and £70m profit.
CEO George Weston said today’s trading update, for the 24-week period ending 1 March 2025, reflected a “robust performance” in four of the group’s five divisions, adding that he was “frustrated” by the group’s sugar performance.
ABF, which owns Primark alongside major food brands such as Twinings, Kingsmill, and Dorset Cereals, had previously said it was revising its forecast for the high street retailer, down from mid-single-digit sales growth. Primark makes up half of ABF’s total revenue.
In the UK and Ireland, which account for around 45% of Primark’s business, like-for-like revenue dropped by 4% over the six-month period, despite strong growth over the key Christmas trading period. The group attributed this decline to cautious consumer sentiment across the wider UK clothing retail market, as well as a lack of seasonal sales in the autumn months due to mild weather.
Grocery sales for the group remained in line with the previous year, with most brands performing “well”, despite lower sales in US oils and Allied Bakeries impacting ABF’s overall grocery growth, as expected.
Adjusted operating profit increased by 1% to £227m, with adjusted operating margin also increasing, to 10.9%, which ABF credits to “strong investment in effective marketing and excellent commercial execution”.
The group’s UK-focused grocery businesses – which account for around a quarter of ABF’s grocery sales – declined overall. This was primarily due to lower volumes and sales from Allied Bakeries, which continues to face a “very challenging market”.
The group is evaluating strategic options for Allied Bakeries against this backdrop and will provide an update in the second half of 2025. Results were mixed across the rest of the UK grocery portfolio, although sales in Silverspoon were lower.
During H1 2025, ABF also focused on growth in its UK foodservice channel, installing a manufacturing line to produce Scrocchiarella bakery products in Bradford, UK.
Weston said that, despite being “frustrated” with the results in the sugar business, ABF is “clear on what needs to be done by way of operational and regulatory solutions to improve financial performance”.
“Primark delivered good growth in Europe and the US, with continued consumer caution in the UK. Primark’s profit and margin delivery was strong and our low-cost operating model is working well,” he added.
“Our focus remains on sharp execution of our key growth initiatives across product, brand, digital and new market entry. Our grocery and ingredients businesses performed well and the outlook remains positive.
“Looking ahead, in an operating environment with significant uncertainties, the group remains well positioned and our strong balance sheet enables continued investment to deliver long-term sustainable growth.”
Wealth Club’s quality shares portfolio manager Charlie Huggins said there was not much to celebrate in the update, as the group warns a return to profitability is likely to take longer than expected.
“Overall, there is no doubt AB Foods faces a challenging environment. But investors will feel it could and should be doing better. The performance of the sugar business leaves a bitter taste and with cost pressures building, improving Primark’s UK sales must be an urgent priority.”
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