Primark shopping bags
Back in April, the company flagged the commercial viability of Vivergo / Image source: Adobe
  • Tariff-free US ethanol to blame
  • Casualty of UK-US trade deal
  • Shares barley move year-to-date

Shares in Associated British Foods (ABF) were marginally higher at £20.61 in morning trading after the global consumer conglomerate said it was in talks with the UK government about the possible wind down of its bioethanol business Vivergo.

Back in April, the company flagged the commercial viability of Vivergo which was being undermined by ‘the way in which the UK government was applying regulations to imported ethanol.’

This situation has been made worse by the UK’s trade deal with the US which will allow tariff-free US ethanol into the UK, the company said.

Associated British Foods will now begin consultation with 160 employees at the bioethanol plant ‘to effect an orderly wind down.’

However, the company still hasn’t given up hope of a lastminute deal and is currently negotiating with the UK government as to whether it can provide short-term funding to cover losses at Vivergo and provide a long-term solution.

If a deal is not reached Associated British Foods would stop manufacturing before the end of the financial year on 13 September 2025.

SUGAR WOES

At the same time, Associated British Foods gave an update about its Spanish sugar business Azucarera saying an operational review have been completed and restructuring of the business is underway.

Associated British Foods plunges as Primark loses market share, Sugar guidance leaves sour taste

The outlook for its sugar business remains unchanged for full year 2025 saying that high rainfall had caused a ‘slow start’ to their processing season in Africa.

‘Production is running at elevated levels to recover some of the initial shortfall,’ the company added.

FUTURE STRATEGY

Russ Mould investment director at AJ Bell said: ‘Primark-owner Associated British Foods has always stood out thanks to its conglomerate structure with a mix of diverse businesses including the Primark retail arm but also footprints in areas like tea, sugar and animal feed.

‘The list of areas it operates in looks set to get shorter as the company’s Vivergo bioethanol operation is in line to be shuttered. The UK-US trade deal agreed in May threatens to flood the UK market with US ethanol, rendering ABF’s plant in Yorkshire unviable.

‘Last-minute negotiations with government aimed at keeping the facilities open seem to have failed.

‘The muted share price reaction to the news reflects the fact this is a relatively small part of the business, and it was already operating at a loss. However, it may prompt wider questions about the future strategy.

‘The Weston family, which controls ABF, has always been protective of its current structure and there is no question the diversification it enjoys was helpful during the pandemic when Primark was unable to operate for long periods. However, the sugar arm, of which Vivergo was a part, has always been volatile and its position in the group may now come under further scrutiny.’

DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) and the editor (Martin Gamble) own shares in AJ Bell. 

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Issue Date: 26 Jun 2025