Associated British Foods "Primark slightly better; Sugar outlook lowered"

Research evidence excerpt

Associated British Foods "Primark slightly better; Sugar outlook lowered"

Growth: ABF expects International brands to see good sales and profit growth,

supported by marketing and innovation, offset by lower volumes and profit in the

US oils business.

Profitability: ABF continues to expect adj. EBIT to be 'moderately below' vs last

year suggesting strong sequential improvement in profit in H2'26 vs H1'26. This is

to be driven by timing of innovation and marketing in the international brands,

reduced impact from high cocoa costs and US tariffs as well as normal seasonality.

Sugar

Q3 results

Sugar delivered Q3 revenue of £451m, -4% CC, VA cons -5.5% CC (period not

comparable). The key highlights include:

Sales decline was mainly due to lower European sugar prices yoy; lower volume

declines in Africa given rain-related production delays in Tanzania and higher

imports in South Africa due to a delay in tariff adjustments.

ABF noted lack of visibility on the phasing of sales and production given the season

spans two financial years

Gas costs are significantly higher due to the Middle East conflict. If this persists,

alongside a lack of inflection on European sugar prices, ABF expects to recognise

onerous contracts in FY26

Outlook

FY26e: ABF now expects an adj. operating loss for FY26 in the range of £25m to

£60m considering higher gas costs, a potential devaluation of the Malawian

kwacha (if not this year, it will likely devaluate next financial year) and uncertainty

in the pace of ramp-up in the new factory in Tanzania. The loss of £25m

assumes: 1) no devaluation of the Malawian kwacha and 2) a good level of

production in the new factory in Tanzania. The loss at the upper end of the range

(£60m) assumes: 1) potential impact of further onerous contracts if gas costs