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(Sharecast News) - Associated British Foods posted a sharp decline in annual profits on Tuesday, as challenging conditions hit both its grocery and retail businesses, and warned of further falls to come.
The owner of fast fashion retailer Primark as well as a host of grocery brands, including Twinings, Ovaltine and Silver Spoon, saw group revenues soften 1% in the year to 12 September, to £19.6bn. Adjusted operating profits on a constant currency basis were 14% lower at £1.5bn.
Revenues at Primark rose 2% at £9.8bn. But on a like-for-like basis, they fell 2.6%, after modest 0.5% uplifts in the UK and Ireland were offset by a 4.7% slide in mainland Europe.
In the grocery business, sales improved 2% to £4.2bn, after a strong performance by a number of brands and the recent acquisition Hovis was partially offset by lower sales of US oils. But the sugar business continued to battle a range of issues, including lower average selling prices, and revenues slid 9% to £2bn.
George Weston, chief executive, said the results reflected "a challenging operating environment and macroeconomic headwinds".
He continued: "We have focused on what we can control, taking targeted actions to drive performance while making good operational and strategic progress and continuing to invest for the long term."
Looking to the current year, AB Foods said work to spin out Primark as a standalone business - first announced in April - was "progressing well", with the demerger due to complete December 2027.
In the remaining business, grocery profits were forecast to be broadly in line with 2026, with expected sales growth in most brands and businesses offset by higher input costs. Profits in the ingredients division were also set to be broadly unchanged on 2026.
However, in sugar AB Foods reiterated expectations for a full-year operating loss of between £70m and £170m, dependent on a range of factors, including "significantly" higher gas costs, El Nino weather impacts affecting production in Africa and currency movements.
As a result, the company expects group adjusted operating profits and adjusted earnings per share in the current year to come in below 2026.
Weston said: "While we remain cautious about consumer sentiment and commodity costs, we will continue our sharp focus on driving financial performance and delivering the growth opportunities from capital investments across the group."
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