Associated British Foods seeks strategic separation amid profit decline  

UK – Associated British Foods (ABF) is actively exploring separating its Primark retail arm from its food operations, as part of a strategic review aimed at enhancing long-term shareholder value amid weakening financial performance.   

This consideration comes as ABF reported a 13% decline in full-year profits for the fiscal year ending September 13, 2025, alongside a 3% drop in total revenue to £19.45 billion (US$25.42 billion).   

Primark, ABF’s fast-growing low-cost fashion retailer, which generates nearly half of the group’s revenues, has expanded its global footprint and delivered a modest 2% rise in operating profit.   

However, its growth prospects are distinct and increasingly divergent from ABF’s broad food portfolio, which includes grocery brands like Twinings (tea), Kingsmill (bread), Ovaltine, and Blue Dragon, as well as major sugar, agriculture, and bakery ingredients divisions.   

These food businesses posted mixed results: grocery sales declined 6%, while sugar operations broke even, resulting in a 23% drop in operating profit.   

Given these contrasting dynamics, ABF’s board, with input from key shareholder Wittington Investments, has been conducting a thorough review of the group’s structure.   

The aim is to determine whether a formal separation of Primark and the food businesses would better position each for growth and clearer investor valuation.   

Rothschild & Co is advising ABF in this process, and a decision is expected by April 2026, aligned with the group’s half-year results.   

Chairman Michael McLintock highlighted the scale Primark has achieved and the need for clearer market understanding of ABF’s food units as principal reasons for the review.   

CEO George Weston expressed confidence in both businesses’ potential, emphasising their exceptional portfolio and global expertise in the food segment.   

However, the current consumer environment remains unpredictable, influencing cautious profit outlooks for the coming year.   

Market analysts view the potential split positively, suggesting it would illuminate the food division’s value while allowing Primark to pursue growth with greater focus.   

The move aligns with a broader corporate trend of breaking up diversified conglomerates to unlock shareholder value by aligning strategic goals more closely with distinct business segments.   

ABF aims to maintain majority ownership in both entities if the split proceeds.   

ABF’s business separation exploration reflects a response to declining profits and the need for sharper strategic focus across its geographically and operationally diverse brands, particularly between Primark’s retail fashion model and the more traditional food manufacturing and retail units.  

In August, the company also acquired the Hovis bread business from the UK-headquartered private equity firm Endless.  

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