Associated British Foods H2 Earnings Call Highlights

Key Points

• ABF’s financial performance weakened: Revenue rose 1% to £19.6 billion, but adjusted operating profit fell 14% and adjusted EPS declined 10.8%. The company expects further declines in profit and EPS in fiscal 2027, mainly because of sugar-market conditions.
• Primark expanded but faced margin pressure: Sales increased 2% to £9.8 billion, driven by new stores, while like-for-like sales fell 2.6% and operating margin declined to 10.2%. Primark plans to focus on improving its U.S. estate, enter Saudi Arabia and Mexico through franchises, and launch U.K. home delivery by the end of 2027.
• Sugar losses and major investment shaped the outlook: The sugar division posted a £47 million operating loss, prompting the closure of the Cantley factory and a reduction in the U.K. footprint. ABF invested £1.4 billion during the year and remains on track to demerge Primark in December 2027.

Associated British Foods LON: ABF reported lower annual profit as weaker consumer sentiment, pressure in Primark and losses in European sugar offset strategic progress across its retail and food businesses.

For the 52 weeks ended Sept. 12, 2026, group revenue rose 1% at reported exchange rates to £19.6 billion, though it declined 1% at constant currency. Adjusted operating profit fell 14% at constant currency to £1.5 billion, while adjusted earnings per share declined 10.8% to £1.56.

The company maintained its proposed full-year dividend at £0.63 per share and completed £250 million in share buybacks during the year. Chief Financial Officer Joana Edwards said free cash flow was unchanged at £652 million, while capital expenditure totaled £1.2 billion and acquisitions added a further £0.2 billion of investment.

ABF said it expects group adjusted operating profit and adjusted earnings per share to decline in fiscal 2027, primarily because of sugar-market conditions.

Primark sales rise, but profit margin declines

Primark sales rose 2% to £9.8 billion, supported by new store openings, which contributed 5% to growth. However, like-for-like sales declined 2.6% amid difficult consumer conditions across many markets.

The U.K. was a relative bright spot. Like-for-like sales rose 0.5%, compared with a 3% decline a year earlier, and Primark gained market share despite a declining clothing retail market. Continental European sales fell 1%, with like-for-like sales down 4.7%. U.S. sales grew 13%, although the company cited tariff-related pressure on consumer sentiment and footfall.

Primark opened 37 stores during the year, including 33 company-operated locations in Europe and the U.S. and four franchise stores in the Middle East. The retailer now has six franchise stores across four Middle Eastern countries and plans to open its first Saudi Arabian location at the end of March. It also signed a franchise agreement for entry into Mexico.

Primark Chief Executive Eoin Tonge said the retailer had focused on restoring its value proposition through lower prices, product improvements, marketing and digital activity. The company’s “Iconic Value” pricing initiative now covers more than one-quarter of its range, and management said it had received a positive response across markets.

Adjusted operating margin at Primark was 10.2%, lower than the previous year. Edwards attributed the decline to increased investment in price, product, marketing, digital capabilities and technology, as well as lower like-for-like sales and higher markdowns. Supply-chain, store-operation and central-cost efficiencies offset inflation, she said.

The company said womenswear delivered like-for-like growth in all markets, while performance wear and athleisure became a particularly strong category in the U.K. Primark also plans further work in kidswear and menswear.

Primark intends to launch home delivery in the U.K. by the end of calendar 2027, supported by its Sheffield facility. Tonge said the offer would target customers who already shop at Primark but do so less frequently and spend more of their apparel budgets online with other retailers. Management expects home delivery to be set up to protect basket economics through minimum order sizes and delivery charges, and said it does not expect the operation to be materially dilutive to group operating margin once it reaches steady state.

In the U.S., Primark opened 14 stores during the year, taking its estate to about 50 stores. The company plans to pause further expansion temporarily to focus on improving the performance, profitability and product range of its enlarged U.S. estate.

Food businesses face oils and sugar headwinds

AB Foods sales declined 4%, including closed and disposed businesses, or 1% excluding those operations. Grocery sales rose 2%, largely reflecting the consolidation of Hovis, while underlying grocery sales excluding Hovis were broadly flat. Grocery adjusted operating profit fell 11%.

The principal grocery headwind came from the U.S. oils business. The Mazola retail brand and Stratas food-service joint venture faced lower demand as consumers reduced spending on edible oils and out-of-home dining. The company said Mazola retained its position as the leading brand in its category.

Other grocery pressures included higher cocoa costs at Ovaltine, sales phasing in Thailand as the business changed distributors, and lower hot-tea consumption in the U.K. and France during summer heatwaves. Twinings nevertheless delivered sales growth, with fruit and herbal teas up by double digits and U.K. sparkling tea ready-to-drink sales rising 70%.

ABF completed its acquisition of Hovis in July and said integration is underway. Management expects production and distribution synergies to begin contributing in the second half of 2027, with the combined U.K. bakery operation becoming earnings accretive in 2028.

Ingredients adjusted operating profit declined 8% to £238 million. AB Mauri was affected by weaker U.S. consumer spending and subdued demand for specialty yeast used in alcoholic beverages, although the ABFI specialty ingredients portfolio posted volume and profit growth.

Sugar recorded an adjusted operating loss of £47 million. In the U.K., lower average selling prices, onerous contract provisions, higher gas costs and lower beet yields following a hot, dry summer weighed on results. ABF is reducing its U.K. sugar footprint from four factories to three through the closure of Cantley.

The company said there were early signs of European sugar-price recovery, but it does not expect its U.K. results to benefit materially in 2027 because customer contracting for the year is substantially complete.

Capital investment and planned demerger

ABF invested £1.4 billion during the year, including projects in new Primark stores, depots, automation, technology, food-production capacity and new capabilities. About 40% of the investment was in Primark and 60% in AB Foods. The company expects capital expenditure to remain at a similar level in 2027 before beginning to reduce in AB Foods from 2028.

Management also highlighted capacity projects in Nigeria, India, Australia and Tanzania, including a new Tanzanian sugar mill that doubles existing capacity and a distillery producing potable alcohol from molasses.

ABF’s year-end net debt, including lease liabilities, rose to £2.8 billion from £2.6 billion, while leverage stood at 1.1 times. Edwards said the balance sheet remained within the group’s capital-allocation policy, with £2.4 billion of total liquidity.

The company remains on track to demerge Primark in December 2027, creating separate Primark and AB Foods businesses. ABF plans to hold separate capital markets days for the two companies in autumn 2027, alongside investor education events covering its grocery, ingredients, and sugar and agriculture operations.

About Associated British Foods (LON:ABF)

Associated British Foods is a diversified international food, ingredients and retail group with sales of £13.9bn, 128,000 employees and operations in 53 countries across Europe, Africa, the Americas, Asia and Australia. Our purpose is to provide safe, nutritious, affordable food, and clothing that is great value for money. With the breadth of our business, our brands and global reach, ABF aims to consistently deliver value to its stakeholders. Our business is split into five segments: Grocery; Sugar; Agriculture; Ingredients; and Retail.

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