By Elena Vardon

Shares in Associated British Foods slumped after the company said it expects modest sales growth at clothing business Primark in the second half of fiscal 2025, while its food businesses performed in line with its expectations despite a continued challenging environment.

At the market open in London, shares tumbled after what analysts described as a softer-than-expected performance update and vague outlook. The stock sank as much as 12% to 1,966 pence--its lowest price in five months.

The British conglomerate on Wednesday said Primark, which accounts for the lion's share of the company's earnings, is expected to report sales growth of around 1% for the six months ending Sept. 13. Like-for-like sales are expected to decrease by around 2%, with a strong performance in the U.S. offset by weakness in Europe due to a more subdued consumer environment, it said.

AB Foods also expects Primark's sales growth for the fiscal year to be around 1%, supported by its plan to open new stores. Its adjusted operating profit margin is expected to come in broadly in line with the previous year's 11.7%.

Chief Executive George Weston noted that the environment continues to be characterized by consumer caution, geopolitical uncertainty and inflation.

The company--which also runs food-processing operations--said it continues to expect its embattled sugar business to report a adjusted operating loss of 40 million pounds ($54.1 million) for the year due to its Vivergo bioethanol plant in northern England. ABF said it is shutting the plant down due to challenges posed by the U.K.'s trade deal with the U.S. which removed the tariff on imported ethanol, making it not viable to operate without government support.

Excluding the impact of the closure, the sugar segment should be close to breakeven with sales expected to fall by 10%, ABF said. Second-half sales and profitability declined due to lower European sugar and higher beet prices, though it expects some gradual improvement from next year onward, ABF said.

Charges linked to the Vivergo closure and the restructuring of its Azucarera plant network in Spain are expected to lead to an around 200 million-pound impairment, it added. These costs will be incurred in the current and next financial year.

"Against a backdrop of continued volatility in 2026, we will start to see the benefit from our recent actions and continued investment," Weston said.

For its grocery segment, the group expects second-half sales to be in line with the prior year with adjusted operating profit slightly below its previous expectations mostly due to one-off restructuring costs.

ABF also estimates that sales at its ingredients business will be stable compared with last year's, with second-half adjusted operating profit slightly ahead of its previous views.

In its agriculture division, sales are seen rising by 1% in the second half, though adjusted operating profit will be significantly below last year's due to a lower contribution from its joint venture and one-off costs, it said.

Associated British Foods is due to publish its results for fiscal 2025 on Nov. 4.

Write to Elena Vardon at elena.vardon@wsj.com

(END) Dow Jones Newswires

September 10, 2025 03:55 ET (07:55 GMT)

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