Adds detail on sugar business from paragraph 4, shares 7

By James Davey

LONDON, July 1 (Reuters) - Primark owner Associated British Foods ABF.L said on Wednesday it still expected annual profit to come in below last year's level, with its sugar business loss-making amid a further deterioration in trading conditions.

The group, which confirmed in April it plans to spin off the Primark fashion business from its food businesses, said group revenue on a constant currency basis was flat in its third quarter.

Primark's revenue increased 3%, with like-for-like sales down 2.2%, reflecting a "challenging" retail environment in most markets, while sales in the group's grocery business, which includes brands such as Ovaltine, Ryvita and Twinings, rose 1%.

REVENUE FALLS IN SUGAR BUSINESS

However, revenue in its sugar business fell 4%, reflecting lower average selling prices in Europe, volume declines in Tanzania and the impact of higher imports in South Africa.

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 for its sugar business.

It now expects an adjusted operating loss for sugar of £25 million to £60 million ($33 million to $79 million) in its 2025/26 year and "a further deterioration" in 2026/27.

Shares in the group fell 3% in early trading.

AB Foods said the performance of its sugar business is a priority area for management.

"We expect to take further action to lower our cost base going forward, particularly in Europe," it said.

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, 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.

($1 = 0.7555 pounds)