Associated British Foods PLC on Tuesday slashed profit guidance for its Sugar business saying the recovery will take longer-than-expected.

Chief Executive George Weston said: ‘I am frustrated with the results in our Sugar business, but we are clear on what needs to be done by way of operational and regulatory solutions to improve financial performance.’

In response, shares in the London-based food processing and clothing retailing business were down 6.5% to 2,094.00 pence each in London on Tuesday. They had earlier traded as low as 2,020.00 pence and are the worst performing stock on London’s FTSE 100, which is flat.

Group pretax profit fell 21% to £692 million in the 24 weeks to March 1 from £881 million a year prior.

Revenue decreased 2.3% on-year to £9.51 billion from £9.73 billion a year ago, falling below Visible Alpha consensus of £9.63 billion, cited by RBC Capital Markets.

Growth in Retail and Ingredients was offset by a decline in Sugar, the firm said.

Sugar division sales fell 6.0% to £1.10 billion from £1.17 billion a year prior, or by 4% at constant currency.

This was primarily due to lower European sugar prices and continued low bioethanol prices.

The unit swung to an operating loss of £122 million from an operating profit of £121 million. On an adjusted basis the Sugar business reported an operating loss of £16 million compared to a profit of £125 million.

As a result, AB Foods now expects Sugar to have an adjusted operating loss of up to £40 million in the financial year compared to previous guidance for a profit of £50 million to £75 million.

In the year that ended September 14, 2024, the Sugar business recorded an adjusted operating profit of £199 million.

‘The timeframe for recovery in the Sugar segment is longer than we had originally expected due a slower-paced rebalancing of supply and demand in European sugar markets and a delay in the recovery of profitability in Tanzania,’ the firm said in a statement.

Elsewhere, AB Foods said its outlook for the financial year is unchanged and reflects a US tariff impact in the second half of the financial year, ‘based on what we know today’.

Primark sales slipped by 1% to £4.47 billion from £4.50 billion a year ago but rose 1% at constant currency.

Operating profit at Primark rose 54.7% to £537 million from £508 million, while adjusted operating margin improved to 12.1% from 11.3%.

AB Foods said in its ‘key growth markets’ - the US, Spain, Portugal, France, Italy, and Central and Eastern Europe - Primark delivered good growth. In the UK and Ireland, sales declined.

But AB Foods said there have been some ‘early signs’ of improvement in the UK in recent weeks.

‘Primark’s profit and margin delivery was strong and our low-cost operating model is working well,’ observed CEO Weston.

For Primark, AB Foods continues to target low-single digit sales growth for the full year, driven by a store rollout programme in growth markets in Europe and the US, which is on track to contribute around 4% to total Primark sales growth.

In Grocery, the firm continues to expect overall performance this year to reflect the ‘normalisation of profitability in our US-focused businesses and an operating loss in Allied Bakeries’.

Allied Bakeries continues to face a very challenging market and AB Foods said it is ‘evaluating’ strategic options for the unit.

In Ingredients, AB Foods expects growth to continue in both its yeast and bakery ingredients businesses as well as in its speciality ingredients businesses.

The half-year dividend was left unchanged at 20.7 pence per share.

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