Associated British Foods (ABF), the FTSE 100 conglomerate behind fast-fashion retailer Primark, warned on Tuesday that its profit is set to fall again as losses in its sugar division deepen. The company is preparing to spin off Primark into a separately listed company, a move it expects to complete by December 2027.
What the numbers show
For the year to September 12th, 2026, ABF reported adjusted operating profit of £1.508 billion, with revenue down 1% to £19.58 billion in constant currency—a measure that strips out exchange-rate swings. The main drag was its Sugar unit, which posted a loss of £47 million in 2025/26. Management now expects that loss to widen to between £70 million and £170 million in 2026/27, as European sugar selling prices remain weak.
That guidance is enough for ABF to say that adjusted operating profit and adjusted earnings per share for 2027 will come in below 2026 levels, mainly because of Sugar. Primark, the group's retail arm, is not fully offsetting the pain: its adjusted operating profit fell 12% to about £1.0 billion, and like-for-like sales—growth at existing stores—slipped 2.6%. ABF pointed to an adjusted operating margin of around 10% for Primark in 2026/27, down from 10.2% last year, even as the company continues to expand its store footprint, which is expected to lift overall sales.
Why the sugar business is struggling
European sugar prices have been under pressure for some time, squeezed by oversupply and changing trade dynamics. For ABF, which operates sugar businesses across Europe and Africa, this has translated into persistent losses. The company has been working to cut costs and improve efficiency, but the weak pricing environment continues to weigh on results.
The wide range of the expected loss—£70 million to £170 million—reflects significant uncertainty about how quickly prices might recover. For investors, that uncertainty is a key concern. When a company's earnings outlook is hard to pin down, markets often assign a lower valuation multiple, meaning each pound of profit is worth less in share price terms.
What the demerger means
ABF's plan to demerge Primark is designed to change the investment picture. By separating the retail business from the food and sugar operations, the company hopes the market will value Primark on its own merits—without the drag of sugar losses—while the remaining food businesses can be judged against closer industry peers.
Demergers of this kind are often used to unlock value when a conglomerate's parts are worth more separately than together. For ABF, the logic is that Primark's steady cash flow and growth potential have been obscured by the volatile sugar business. Once separated, each entity could attract a different type of investor.
The demerger is expected to complete in December 2027, giving management time to prepare the businesses for independent operation. Until then, investors will be watching how sugar prices evolve and whether Primark can stabilise its margins.
What it means for investors
For everyday investors, the key takeaway is that ABF's near-term earnings are likely to remain under pressure. The sugar loss range is wide, and that uncertainty could keep a lid on the share price until the demerger provides clearer visibility.
Primark's performance is also worth monitoring. While store expansion should support sales, the decline in like-for-like sales and margin suggests the retailer is facing its own challenges, possibly from higher costs or softer consumer demand. The company's ability to maintain its value-focused proposition will be crucial.
For those holding ABF shares, the demerger could eventually unlock value, but it comes with a long wait. In the meantime, the company's profit is expected to fall, and the market may remain cautious. As with any major corporate restructuring, there are execution risks—the separation could be delayed or encounter regulatory hurdles.
Investors should also consider the broader context. ABF is not alone in facing headwinds; other consumer and industrial companies have recently reported profit pressures. For example, Lufthansa cut its profit forecast due to rising fuel costs, and Apple's margins are being squeezed by higher memory chip costs. These examples highlight how input costs and pricing power are affecting companies across sectors.
Ultimately, ABF's story is one of a conglomerate in transition. The next two years will be pivotal as it navigates sugar losses, works to stabilise Primark, and prepares for a split that could reshape its investment case. For now, the message is clear: expect more pain before the potential payoff.
