Shares in Associated British Foods fell today (1 June) after the UK group said its sugar business had been hit by the Middle East crisis.
ABF said the Middle East conflict had pushed up costs for its sugar arm and would dent the company’s profits in Europe.
“Aside from sugar, our full year outlook for the group is unchanged,” ABF chief executive George Weston said in a trading update for the 16 weeks to 20 June.
The Twinings tea and Patak’s cooking sauces owner stuck to its group forecast for company-wide adjusted operating profit and adjusted EPS to be lower year-on-year.
ABF’s sugar business operates in the UK, Spain and Africa. Its consumer-facing brands in sugar include Silver Spoon in the UK and Bwana Sukari in Tanzania.
Sales from ABF’s sugar business declined 4% in the 16-week period, which amounts to the company’s third quarter.
ABF pointed to reduced selling prices in Europe and the impact of higher imports in South Africa due to a delay in tariff adjustments.
In the UK, the company’s expectations for the 2025/26 beet crop are unchanged but it said the profitability of the 2026/27 crop was “still difficult to assess”.
The contracting round has started and, even though ABF said there had not been “an upward inflection” in European sugar prices, the company has seen gas costs rise “significantly” due to the Middle East conflict.
The group added: “If these dynamics persist, we expect to recognise onerous contracts in the 2026 financial year.”
In April, ABF announced plans to split its mix of food businesses from its clothing-retail arm Primark. The group said the split is intended to create “a clearer investment proposition” for each part of the company.
ABF expects the demerger to be completed before the end of the 2027 calendar year. The new FoodCo business will span the group’s operations in grocery, ingredients, agriculture and sugar.
In the company’s fiscal third quarter, revenue from its grocery arm grew 1%. ABF cited “good growth across a number of our brands and businesses” that was partly offset by lower sales of cooking oils in the US amid lower spending by Hispanic consumers.
Last month, the UK competition authority approved ABF’s acquisition of rival baker Hovis.
ABF’s share price stood at 1,910 pence at 13:42 BST today, down 3.82%.
