ABF Q4 update: overview
- ABF says prolonged summer heat reduced Twinings tea sales across the UK and Europe
- Lower sugar prices, higher gas costs and poor beet crop yields weighed on sugar profits
- Ingredients business delivered strong growth, with sales expected to rise by around 10% in Q4
- ABF expects its Sugar division to post a loss towards the upper end of guidance for 2026
- The newly acquired Hovis business is expected to dilute profits in 2027 before synergies are realised
The scorching European summer of 2026 hasn’t been kind to hot drinks. Associated British Foods has announced that it sales of Twinings were down in its latest trading update for Q4.
While “sales in the UK and Europe were lower than expected due to the long, hot summer reducing hot tea consumption”, it said that grocery sales are expected to have gone up in Q4 with good growth in Australia for Twinings.
Growth for Ovaltine, its malted hot drink, was also impacted “by the phasing of sales in Thailand as we changed to a new distribution mode”.
Overall, adjusted operating profit for Grocery is expected to be below expectations for the 2026 financial year, “mainly due to the short-term impacts on Twinings and Ovaltine”.
Sugar also impacted
Its Sugar business saw a downturn in the UK and Spain, which ABF attributed to “lower average selling prices in Europe compared with Q4 2025″.
The weather also comes into focus again.
ABF said that profits were “significantly impacted by the recognition of onerous contract provisions due to continued low European sugar prices, higher gas costs and lower yield expectations for the 2026/27 UK beet crop following the prolonged hot and dry weather. The lower yield expectations reduce the absorption of fixed production costs”.
Overall for 2026, it predicts that Sugar will see an adjusted operating loss towards the higher end of its guidance range of £25m to £60m. The factors it lists as potential problems include higher gas costs, production levels in Africa and El Niño weather impacts.
However, it said that despite an expected significant downturn in European sugar production," it is likely that the European sugar market will remain in surplus in the short term due to the high inventory levels carried over from 2025″.
For beet, it recapped on its July announcement of its intention “to reduce our footprint from four to three sites in the UK, ceasing beet processing at Cantley in 2027″.
Better news was seen in ingredients, however, with Q4 sales expected to increase approximately 10%. “Our yeast and bakery ingredients business, AB Mauri, delivered good growth across most of our markets. Our portfolio of speciality ingredients businesses, ABFI, continued to grow well overall.”
Looking ahead
Looking forward, ABF referenced its acquisition of Hovis, which it completed in July 2026. “In 2027, our outlook reflects a one-off impact from consolidating Hovis losses in the first year of ownership, ahead of delivering significant synergies and profit accretion in subsequent years,” said ABF.
“Grocery and Ingredients both delivered good growth in the quarter, although the prolonged hot weather in the UK and Europe impacted consumer demand for Twinings tea,” summarised chief executive George Weston. “While a number of factors contribute to our negative outlook for Sugar in 2027, the recent positive turn in European and global sugar pricing should benefit future years.”
