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LONDON, July 1 (Reuters) - Primark owner Associated British Foods ABF.L still expects annual profit to be below the prior year's outcome, it said on Wednesday, as it reported flat third quarter revenue.

The group, which confirmed in April it plans to spin off the Primark fashion business from its food businesses, said Primark's revenue increased 3% on a constant currency basis in the quarter, while sales in its grocery business, which includes brands such as Ovaltine, Ryvita and Twinings, rose 1%.

However, revenue in its sugar business fell 4%.

In sugar, AB Foods said the duration and severity of the Middle East conflict has increased gas price expectations for next year, which has impacted its European profit outlook.

Aside from sugar, the group's full year outlook is unchanged.

"We continue to expect Group adjusted operating profit and adjusted EPS in 2026 to be below last year," it said.

Prior to the update, analysts were on average forecasting a year to September 2026 adjusted operating profit of £1.55 billion ($2.05 billion), according to LSEG data, down from the £1.73 billion it made in 2024/25.

"We remain on track for the demerger to become effective before the end of 2027 calendar year," the group said.

Shares in AB Foods have fallen 7% so far this year.