Associated British Foods (LSE:ABF) shares traded 2.9% lower on Wednesday, to 1,928p, after a Sugar profit downgrade.
The deterioration was driven primarily by elevated gas costs in Europe, where the prolonged Middle East conflict has pushed energy price expectations higher, triggering the likelihood of onerous contract provisions for the 2026/27 UK beet crop if current gas prices persist.
Lower average European selling prices and volume shortfalls in Africa, caused by rain-related production delays in Tanzania and higher South African sugar imports, compounded the shortfall.
"The duration and severity of the Middle East conflict have increased gas price expectations for next year, which has impacted our European profit outlook," chief executive George Weston said.
Beyond Sugar, full-year guidance is unchanged: group adjusted operating profit and adjusted earnings per share in 2026 are still expected to be below last year.
Primark, which accounts for the largest share of group revenue, delivered third-quarter sales growth of 3% in constant currency, though like-for-like sales fell 2.2%, with the company maintaining its full-year adjusted operating profit margin guidance of approximately 10%. Grocery and Ingredients both posted modest constant-currency revenue growth of 1% and 3% respectively.
ABF also noted that, looking into the 2027 financial year, it currently expects a further deterioration in the Sugar result beyond the upper end of the 2026 range, though it flagged multiple variables that could influence the outcome materially in either direction.
The planned demerger of Primark from ABF's food businesses remains on track to become effective before the end of calendar year 2027.
Scant chance of quick recovery, according to broker
There's little prospect of a swift turnaround, not according to stockbroker Hargreaves Lansdowne, as equity analyst Aarin Chiekrie warns that a broadly flat third-quarter trading update "has done little to hint that a sharp improvement in fortunes is just around the corner."
Chiekrie argues that the headline £5.3bn in third-quarter revenue, flat on a currency-adjusted basis, masks a deteriorating picture at the group's two smallest divisions, with Sugar and Agriculture declines offsetting low single-digit growth elsewhere across Associated British Foods, the diversified food and discount retail conglomerate.
"Consensus market forecasts of a roughly 13% decline in operating profits to around £1.5bn feel more realistic to us," Chiekrie added, seeing the market's estimate as a more credible landing point than management's reiterated but vague guidance for full-year underlying operating profits to come in below last year's £1.7bn.
