Associated British Foods to Demerge Primark as Profits Fall 9%

Primark is to break free from its sister food company, which owns Twinings, Kingsmill and Patak's, next year despite warning that the conflict in the Middle East is likely to hit consumer spending. The fashion chain's owner, Associated British Foods (ABF), confirmed the plan to split off Primark from the rest of the group, first mooted last year. The announcement came as the company reported that group sales fell 2% to £9.46bn in the six months to 28 February and pre-tax profits were down 9% to £632m. The company said its sugar business performed "below our expectations" and was now expected to report an annual loss, while its grocery business had faced weak trading in the US. Sales at established Primark stores across the world fell 2.7% in a "difficult clothing market". In the UK, Primark sales rose as the cut-price chain gained market share, but this was offset by a 5.6% fall in mainland Europe where it said consumer confidence was weak and measures to link stores to online services were not as advanced as in the UK. "An encouraging start to spring/summer trading in March was followed by softer trading in April as we started to see the impact of the Middle East conflict on the consumer," the company said. George Weston, the chief executive of ABF, said: "We are managing the impacts of the Middle East conflict. Given what we know today, we expect the cost consequences in 2026 to be manageable. However, there is a risk to Primark sales if the conflict persists and consumer spending deteriorates. Our strong balance sheet underpins the group's resilience." Weston, a member of the family that controls ABF and the long-term chief executive of the group, is to lead the food business after the demerger, which is expected to conclude by the end of 2027, while Eoin Tonge, the experienced former ABF, Marks & Spencer and Greencore finance director, will remain as chief executive of Primark. The ABF chair, Michael McLintock, said it had concluded that a demerger of its fashion retail arm was "the best way to maximise long-term returns for shareholders, reflecting Primark's scale today and the need for a better understanding of the food business. "The opportunities ahead for both Primark and FoodCo are considerable and the board firmly believes that each will thrive as an independent entity." Weston said: "This is an important step in the evolution of ABF. For our food business, the separation will enable greater understanding of the breadth and strength of our differentiated portfolio and its long-term growth opportunities as the only FTSE 100 pure-play food producer."