Associated British Foods (ABF) anticipates further widening of losses in its sugar division over the next two years, highlighting ongoing difficulties as the company prepares to separate its food business. The parent company of British Sugar has projected operating losses at the upper end of a range between £25 million and £60 million for the current year. These losses are partly attributed to rising energy costs following the conflict involving Iran.

ABF indicated that if prevailing market challenges continue, losses could escalate to as much as £170 million in the next financial year. This projection is contingent on variables such as the development of a notably strong El Niño weather pattern and production levels in African markets. The company’s shares declined by 7.9 percent, falling 160 pence to close at £18.60.

The sugar unit, under the leadership of Chief Executive George Weston, has faced persistent pressure from declining sugar prices in Europe, a situation exacerbated by recent geopolitical tensions in the Middle East. The division also encountered a slowdown in the previous quarter, influenced by weather-related production delays in Tanzania. ABF has invested in a new sugar factory in Tanzania’s Morogoro region, known as “K4.” Additional challenges included increased sugar imports into South Africa, impacting regional markets.

In response to these difficulties, ABF plans to streamline its UK operations by reducing the number of production sites from four to three, with the factory in Cantley, Norfolk, scheduled for closure in 2027. The company noted that while European sugar production is expected to decline significantly, an overall surplus in the regional sugar market is likely in the short term, due to high inventory levels carried over from 2025.

Analysts from RBC Capital Markets observed that recent improvements in sugar prices could enhance the profitability of ABF’s sugar operations starting in the fiscal year 2028, even after accounting for elevated energy expenses.