Key facts
- Associated British Foods (ABF) anticipates a loss of up to £60 million in its sugar business for the financial year.
- The company attributes this expected loss to the Middle East conflict, which has driven up European gas costs.
- ABF plans to implement further cost-reduction measures, especially in its European operations.
- Primark's overall sales increased by 3% in the third quarter, though like-for-like sales declined by 2.2%.
- ABF is proceeding with plans to spin off its retail arm, Primark.
Associated British Foods (ABF), a FTSE 100 company, has warned that its sugar business is expected to incur losses of up to £60 million for the financial year. The multinational conglomerate cited the "duration and severity" of the Middle East conflict, specifically mentioning increased gas price expectations and their impact on the European profit outlook. ABF noted that while European sugar prices have not yet risen, gas costs have significantly increased.
Europe and the UK account for approximately 50% of ABF's total sugar revenue. The company plans to implement further cost-cutting measures, particularly in Europe. In its retail division, Primark experienced a 3% growth in sales during the third quarter, driven by new store openings. However, like-for-like sales decreased by 2.2%, with Continental Europe seeing a 3.6% decline and the UK remaining flat. Primark continues to gain market share in the UK's declining clothing market, despite a weaker performance in April and May attributed to unseasonal weather and the Middle East conflict dampening sentiment.
In the United States, Primark sales rose by 16%, boosted by the opening of its first Manhattan store, bringing its US footprint to 41 stores. ABF confirmed plans to spin off Primark, a move expected to result in both entities being separately listed on the FTSE 100 index. The company stated it is confident in the prospects of both businesses, with CEO George Weston calling the spin-off an "important step in the evolution" of the group.