Associated British Foods (ABF.L) on Tuesday confirmed plans to separate its retail and food operations, while reporting lower fiscal first-half earnings, weighed by headwinds including weakness in its sugar business.
Following a November 2025 review, the food processing and retailing company intends to split its fast-fashion retail business, Primark, from its FoodCo business via a dividend demerger expected to be completed by the end of 2027. While both entities are expected to be FTSE 100 constituents, the food business will keep the ABF name, with current shareholders receiving stakes in both companies.
The transition is expected to incur 75 million pounds sterling in one-off separation costs, with dis-synergies projected to come in below 45 million pounds. Following the split, ABF Chief Executive George Weston will lead FoodCo as CEO, while Eoin Tonge will take the helm at Primark.
Bernstein viewed the as-expected Primark demerger as a sound strategic move. "This is a good decision in the long-term, but which will not create short-term value on our estimates... Overall, we expect the shares to be weak today despite the good decision to split the business, given the weak underlying performance of the business," the research firm said.
Shares were almost 3% down in Tuesday midday trading in London.
Highlighting these underlying struggles, ABF's attributable profit for the 24 weeks ended Feb. 28, 2026, stood at 445 million pounds, against the 520 million pounds in the 24 weeks ended March 1, 2025. Group revenue fell to 9.47 billion pounds, in line at actual currency but down 2% at constant exchange rates, as ABF absorbed higher upfront costs and sustained its investment in future scaling.
Retail sales were up 2% on "good execution" of new store openings, alongside improved like-for-like sales and Primark market share in the UK. These gains were offset by a combination of weak European consumer confidence, reduced demand for US oils and bakery ingredients, and a decline in European sugar prices.
ABF held its lowered fiscal full-year guidance steady except in sugar, where it now anticipates a full-year loss. While the group views current Middle East cost pressures as manageable, it cautioned that a protracted conflict could dampen discretionary spending, posing a risk to Primark's sales trajectory.
"We knew the first half of this financial year was going to be challenging and that's borne out in our financial results. However, we still expect improved Group performance in the second half," Weston said. "Our Grocery and Ingredients businesses performed as we had expected them to, with our US businesses impacted by weak consumer demand. Our international Grocery brands delivered good sales growth and are positioned for a stronger profit performance in the second half. In Sugar, the results were below our expectations and given the current market conditions, we are more cautious on the outlook."