“maybe It’s Time To Do Something Different” – Abf Split Could Prove Positive For Food

ABF’s Blue Dragon sauces connected waste successful Los Angeles, California, 14 August 2025. Credit: The Image Party/Shutterstock

Associated British Foods whitethorn precocious person gone immoderate measurement to reply nan persistent questions it has faced astir its future successful nan UK breadstuff market – but nan food-to-retail conglomerate has besides had to woody pinch queries astir nan very make-up of its empire for conscionable arsenic long.

And, past week, nan proprietor of Mazola cooking oil, Silver Spoon sweetener and Twinings beverage raised eyebrows pinch its announcement that, yes, it mightiness now beryllium fresh to divided its nutrient operations from Primark, its world clothing-retail business.

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The committee of nan London-listed group has been reviewing nan company’s building “with a position to maximising semipermanent value”, ABF announced.

The business sought to emphasise that “no determination has been taken” but added nan reappraisal whitethorn lead to a separation of Primark from its interests successful food, which, arsenic good arsenic market brands, return successful sweetener refining, nutrient ingredients and businesses successful agri-food for illustration provender and fertiliser.

ABF’s largest shareholder, Wittington Investments, “remains committed to maintaining mostly ownership of some businesses”, nan institution added.

The UK-headquartered group is tally done 5 “operating businesses” and retail, which houses Primark, is nan largest by sales, generating £9.5bn, aliases $12.49bn, (around 48%) of nan company’s group income of £19.46bn successful nan twelvemonth to 13 September.

The accounts showed nan ABF group generated an operating profit of £1.48bn. On its own, nan unit business brought successful £1.12bn successful operating profit during nan year.

Tune into immoderate telephone ABF’s guidance holds pinch City analysts and astir of nan questions attraction connected Primark and its prospects.

“Our unsocial and exceptional nutrient business has historically been little good understood by nan financial markets than Primark, yet it has a highly charismatic portfolio, heavy world expertise and overmuch potential,” George Weston, ABF’s main executive, said past Tuesday erstwhile nan Tip Top baker announced nan results and its strategical review. If nan divided does happen, Weston told analysts he “would dream to proceed arsenic CEO of nan nutrient businesses”.

ABF has not been unsocial among much sprawling businesses successful facing nan statement that it faces nan alleged “conglomerate discount” – that nan institution is, put simply, weighted little than nan sum of its parts.

A antagonistic statement would beryllium ABF’s diversified quality shelters nan institution from downturns. Now, however, it’s clear different type of early for nan business could beryllium connected nan horizon.

“A large call”

Speaking to analysts aft announcing nan imaginable demerger, Weston wanted nan attraction of their questions to beryllium focused connected ABF’s yearly results, which were published astatine nan aforesaid time.

Needless to say, that was, understandably, unlikely. Barclays expert Warren Ackerman asked why nan institution was considering nan move. “As agelong arsenic I’ve covered nan stock, I ne'er really thought it’s connected nan table, truthful what’s changed successful your mind?” he asked

“It’s astir semipermanent governance,” Weston replied. “I deliberation location are 2 different issues. The first 1 is nutrient wherever I deliberation we haven’t, rather frankly, been getting nan scrutiny from nan finance organization that would service america good because astir of nan scrutiny has been astir unit and possibly we want to put that right.

“On Primark, it’s really astir oversight of what is now a very large and very analyzable business. And conscionable possibly there’s a amended oversight exemplary disposable to america than nan superb exemplary that we’ve been moving pinch for 60 years. So, you spell ‘Well, that was 60 years. That worked perfectly fabulously and now, looking into nan future, possibly it’s clip to do thing different.

Weston acknowledged it is “a large call” and added: “In position of timing, I would ideate that we would person travel to a conclusion astir whether to enactment together aliases propulsion ourselves isolated by nan interims and nan process of really getting location will return 18 months aliases so.”

Questions complete Primark

In a statement to clients, Ackerman said location is “broad statement that location is beautiful compelling logic” successful a divided but location is “some caput scratching astir nan timing of nan announcement” amid “lacklustre trading” and nan valuations among immoderate peers successful nutrient and ingredients being nether pressure.

“The underlying mobility we deliberation immoderate investors are trying to get astatine is whether nan announcement astir nan information of a divided was being made from a position of spot aliases a position of comparative weakness,” Ackerman added.

ABF’s unit division, which attracts overmuch of nan City’s attraction fixed its publication to nan company’s revenues and profits, saw its income inch up 1% successful nan twelvemonth to 13 September, contributing to a 2% summation successful operating profit. However, like-for-like income fell 2% amid declines from nan retailer’s mixed UK and Ireland business and from its operations connected continental Europe.

While Primark’s gross margins are backmost to being supra pre-Covid levels, nan retailer’s like-for-like income whitethorn interest immoderate investors, particularly if a divided does happen. “The disadvantage could beryllium a deficiency of nutrient cashflow to thief money description of Primark going forward,” RBC expert Richard Chamberlain said.

A mixed 12 months for food… 

ABF’s nutrient assets person conscionable had a mixed 12 months. Revenue and operating profits from nan market section were down (though income were level astatine constant-currency), arsenic nan company’s US oils and UK breadstuff business offset maturation from hot-drinks brands Twinings and Ovaltine (which person consistently performed well) and amended income and net from nan group’s assets successful Australia and New Zealand.

Revenue from ABF’s ingredients business fell but operating profits grew amid “productivity savings” and activity connected managing input costs.

The sweetener arm, income fell amid debased European prices. The section swung to an operating nonaccomplishment arsenic nan little income mixed pinch nan precocious costs of beet.

And ABF’s agriculture business saw gross and operating profit diminution amid “one-off costs” and “a reduced contribution” from nan Frontier grain-marketing task nan institution has pinch Cargill.

ABF has a somewhat cautious outlook for its operation of nutrient business for its caller financial year. The institution expects profits from its market limb “to beryllium astir nan aforesaid level” arsenic nan US oils business continues to beryllium challenging.

It expects to “hold adjusted operating profit successful ingredients astatine broadly this year’s level” and nan aforesaid metric for agriculture “to stay successful statement pinch 2025”. ABF is forecasting “a mini adjusted operating profit” from its sweetener business arsenic beet prices easiness and nan group benefits from caller restructuring actions.

…but divided seen arsenic positive

That said, wrong ABF’s wide handbasket of nutrient assets, nan company’s guidance sees a number of a positives, including its “international market brands” for illustration Twinings, Ovaltine and Blue Dragon, down which nan group is investing successful capacity successful Poland.

Weston besides points to “strong fundamentals” successful ABF’s sweetener business successful Africa and nan imaginable of its ingredients arm. In nan twelvemonth conscionable past, 60% of nan company’s £1.2bn superior finance successful went into food. “Really nan early of nan nutrient group is astir increasing nan beautiful bits, overmuch much than it is astir fixing nan past fewer benignant of headaches,” Weston told analysts.

ABF has sought to return action astatine immoderate of its much challenging nutrient businesses successful caller quarters, including nan move to bolster Allied Bakeries by buying UK competitor Hovis and restructuring its Spanish sweetener business Azucarera.

“With nan decisions that person been taken complete nan past 18 months, [ABF’s nutrient business] will person little baggage, should person a beardown equilibrium sheet, beryllium very rate generative and beryllium a level for further growth,” Shore Capital expert Clive Black tells Just Food.

“I don’t consciousness that ABF is going to go a stereotype, high-dividend yield, cash-generative, staple business. I deliberation location are ambitions to turn that institution and nan platforms successful agriculture, ingredients and market perfectly supply that.”

Richard Wyborn, a partner astatine European consultancy Food Strategy Associates, calls retired areas wherever he thinks ABF whitethorn look to invest. “It has stated it wants to thrust its large brands Ovaltine, Twinings and Mazola while it will besides want to return steps to turn its position successful bakery ingredients, something that will apt beryllium a attraction for early acquisitions,” he says.

Aside from Africa, immoderate spot ABF being much circumspect astir investing successful its sweetener business. ABF’s sweetener limb mightiness beryllium “more of a cash-generative business, sweating nan assets successful nan UK and Spain”, Black says. “But [ABF’s nutrient business] should beryllium a medium- to semipermanent maturation communicative pinch a very beardown equilibrium sheet.”

It would beryllium excessively easy to constituent ABF’s imaginable divided arsenic another example of a major, listed sanction turning to a demerger to thrust value. “I don’t spot it for illustration that,” Wyborn says. “This separation makes acold much consciousness than immoderate different precocious announced deals fixed nan near-zero synergies that beryllium crossed nan unit and foods-related parts of nan business.”

Black agrees. “This is different. This is astir a business wherever it’s going to beryllium looking astatine focusing upon wholly segmented channels betwixt unit and food.

“Within nan discourse of AB Foods, this is not astir a strategy of attraction successful position of further demergers and worth creation that way. This is astir nan use of attraction astatine a food-group level and applying a maturation strategy upon nan beardown foundations successful agriculture, ingredients and market – very different to nan database of multi-product, FMCG companies where, frankly, attraction has been engineered because location were diseconomies from being group up arsenic they were.”