Why Is Associated British Foods Plc Down Today?

Associated British Foods Plc shares fell 2.06% to around 1,903.0p today, a decline of 40.00p, according to the supplied market data.

The decline follows the publication of the group’s full-year results for the 52 weeks to 12 September 2026, in which it reported lower profits and warned that profit and Earnings Per Share will fall again in its 2027 financial year.

Adjusted operating profit fell 14% at constant currency to £1.51 billion, while group Revenue of £19.58 billion was down 1% at constant currency.

The weaker outlook, driven largely by losses in Sugar and softer underlying sales at Primark, appears to be the main reason for today’s fall.

About Associated British Foods Plc

Associated British Foods Plc is a diversified international food, ingredients and retail group.

Its largest Business is Primark, the value fashion retailer with stores across the UK, Europe and the United States.

The food businesses include Grocery, with brands such as Twinings, Ovaltine and Kingsmill, as well as Ingredients, Sugar and Agriculture.

ABF (LSE:ABF) confirmed in April 2026 that it plans to demerge Primark from its food businesses, creating two separately listed companies.

Key Reasons Behind Today’s Downtick

Today’s 2.06% decline reflects a disappointing outlook rather than a surprise in the 2026 numbers, which were broadly in line with previous guidance.

The main issue is the warning that 2027 profit and EPS will be lower than in 2026.

Sugar remains under pressure from weak European sugar prices and high energy costs, with the Middle East conflict lifting gas price expectations.

Primark’s like-for-like sales were also down around 2.6% for the year, reflecting a challenging consumer environment in several markets.

The shares also traded during a weaker session for global equities, which added to the pressure.

Full-Year 2026 Financial Performance

ABF reported a weaker year in 2026.

Group revenue was £19.58 billion, down 1% at constant currency.

Adjusted operating profit fell 14% to £1.51 billion, and adjusted profit before tax also fell 14% to £1.46 billion.

Adjusted earnings per share declined 11% to 156.0p, while free Cash Flow was £652 million.

The group recorded £113 million of exceptional charges, mainly non-cash impairments and restructuring costs. Return on average Capital employed fell to 12.7% from 15.5%.

Primark Performance

Primark remains the most important driver of the group’s value.

Primark revenue rose 2% at constant currency to around £9.8 billion, helped by new store openings, while operating profit fell 12%.

Like-for-like sales declined around 2.6% for the year as the business invested in lower prices, Marketing and digital capabilities.

Primark has continued to expand in the US, reaching 47 stores, and is building its Franchise model in the Middle East, with stores in Dubai and Kuwait.

The business has also announced home delivery in Great Britain as part of its digital strategy.

Sugar Is the Main Drag

Sugar has become a significant drag on group earnings.

The business moved into an adjusted operating loss in 2026, towards the higher end of the guidance range of £25 million to £60 million, reflecting onerous contract provisions.

Weak European sugar prices and higher Natural Gas costs have squeezed margins.

Management expects Sugar losses to continue to weigh on group earnings in 2027.

Grocery and Ingredients Provide Stability

Grocery and Ingredients delivered solid results during the year.

These businesses benefit from strong brands and specialist products, providing a more stable earnings base than Primark or Sugar.

This stability will be important for the food group as a standalone business after the Primark demerger.

The Primark Demerger

The planned demerger is the most important strategic development for ABF.

Separating Primark from the food businesses would allow investors to value each business on its own merits.

Primark could be valued alongside other international retailers, while the food businesses could attract investors seeking defensive, cash-generative assets.

Management has noted that dis-synergy costs will arise as Primark moves towards demerger readiness. The 53-week 2027 financial year will also affect comparisons.

Capital Returns

ABF continues to return cash to shareholders.

The total Dividend was held at 63.0p per share, including an Interim Dividend of 20.7p.

The group completed £253 million of share Buybacks during the year.

Net cash before Lease liabilities was £305 million at the year end, compared with £390 million a year earlier, while gross Investment rose to £1.43 billion.

Key Growth Catalysts

The biggest catalyst for ABF (LSE:ABF) is the Primark demerger, which could unlock value by creating two more focused companies.

A recovery in Primark’s like-for-like sales would significantly improve earnings momentum.

US expansion and franchising offer longer-term growth opportunities for Primark.

An improvement in European sugar prices or lower energy costs would reduce Sugar losses.

Continued buybacks could support earnings per share.

Consumer Exposure

ABF is highly exposed to consumer spending, particularly through Primark.

Inflation, wages, interest rates and consumer confidence in the UK and Europe all affect clothing demand.

Weather can also affect seasonal clothing sales.

A recovery in consumer sentiment would support Primark, while continued pressure on household budgets could weigh on like-for-like sales.

Risks

Further weakness in Primark’s like-for-like sales is one of the key risks.

Sugar losses could persist if European prices and energy costs remain unfavourable.

Execution risk around the demerger, including dis-synergy costs, is another consideration.

Higher costs for wages, energy and freight could pressure margins.

Currency movements affect reported results because of the group’s international operations.

Conclusion

ABF’s 2.06% decline to 1,903.0p follows full-year results showing a 14% fall in adjusted operating profit to £1.51 billion and a warning of lower profit in 2027.

Primark revenue rose 2% to around £9.8 billion, but like-for-like sales fell and operating profit declined.

Sugar losses remain the main drag, while Grocery and Ingredients provide stability.

The planned Primark demerger remains the key potential catalyst for unlocking value.

The key factors to monitor are Primark like-for-like sales, Sugar losses, demerger progress, capital returns and consumer spending trends.