By Andrea Figueras

Shares in Associated British Foods plunged after it warned that the recovery in profitability for its sugar business will take longer than initially anticipated.

The stock was 7.15% lower at 2,079 pence in European morning trading, leading the FTSE 100 fallers. Since the start of the year, shares are up 1.7%.

The group said Tuesday that it now expects the segment to report an adjusted operating loss of up to 40 million pounds ($53.8 million) for fiscal year 2025 as a whole. It had previously anticipated operating profit in a range of 50 million pounds and 75 million pounds.

The commercial viability of its biofuel business Vivergo--part of the company's sugar division--is being undermined due to the way in which regulations are being applied to bioethanol.

"We are having constructive discussions with the U.K. government to explore regulatory options to improve the position," it said, adding that the group could mothball or close the Vivergo plant if necessary.

Furthermore, the company is close to completing an operational review of its Spanish business, Azucarera, due to the deterioration in market conditions.

A sale or carve out of the volatile sugar business into a separate entity would make the investment case for AB Foods more compelling, Panmure Liberum analysts Anubhav Malhotra and Wayne Brown said in a research note.

As for the group's key Primark business, the company continues to anticipate low-single digit sales growth for the year as a whole. It also targets an adjusted operating profit margin broadly in line with last year's level. While the performance in the U.K. is expected to remain challenging in the second half, there have been some early signs of improvement in recent weeks.

The outlook reflects the absorption of the impact of U.S. tariffs in the second half, based on available information, the conglomerate said, adding that in an operating environment with significant uncertainties, it remains well positioned for the medium term.

Meanwhile, the group reported pretax profit of 692 million pounds for the first half ended March 1. This was 21% lower at current rates compared with the prior-year period and below analysts' forecasts of 828 million pounds, according to a Visible Alpha poll.

Revenue fell 2% on year to 9.51 billion pounds, missing analysts' forecasts revenue of 9.63 billion pounds.

"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," Chief Executive George Weston said.

Primark reported a decline in like-for-like sales of 2.5% due to a challenging environment in the group's home market and Ireland. "We have a clear roadmap for new store rollouts in our growth markets and we are targeting that these will contribute around 4% to 5% to Primark's total annual sales growth for the foreseeable future," AB Foods said.

Write to Andrea Figueras at andrea.figueras@wsj.com

(END) Dow Jones Newswires

April 29, 2025 04:27 ET (08:27 GMT)

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