ABF’s sugar losses to deepen as weak prices, energy costs squeeze margins

Associated British Foods PLC's (LSE: ABF) sugar business is facing a sharp deterioration in profitability as weak European sugar prices and higher production costs weigh on the division. Once a meaningful contributor to group earnings, Sugar accounted for 11% of ABF’s operating profit as recently as 2024. Its profitability collapsed in 2025, and analysts now expect the recovery to be pushed further out.

Visible Alpha consensus estimates show the Sugar division’s operating loss widening to £48 million in 2026, from £2 million in 2025, before deepening further to £68 million in 2027. Operating margins are expected to fall to -2.5% in 2026 from -0.1% last year and to -3.6% in 2027. Both forecasts have been revised sharply lower since the start of the year, making Sugar the principal drag on ABF’s earnings outlook.

The deterioration reflects a difficult European sugar market, where lower selling prices have been compounded by higher energy and production costs. ABF said in July that elevated gas prices, partly linked to the Middle East conflict, had increased the risk of costly contracts for the 2026/27 beet crop.

Consensus now points to a much slower recovery in Sugar than previously expected. While analysts anticipate improvement over the medium term, the division is unlikely to return to its historical earnings contribution.

The weakness comes as ABF moves to demerge Primark Ltd. from its food operations, a separation expected to be completed by the end of 2027. The transaction is intended to give the two businesses greater strategic focus, with the food operations retaining the ABF name.

Sugar, which accounts for roughly 10% of group revenue, is forecast to generate £1.9 billion of revenue in 2026, down 5.7% year-on-year. The weakness adds to declines expected in Agriculture, where revenue is forecast to fall 6.3%, and Ingredients, where revenue is expected to slip 0.1%. As a result, group revenue is projected to edge down 0.1% to £19.4 billion in 2026.

This article was published by Visible Alpha, part of S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.