Shares in Associated British Foods PLC (LSE:ABF) fell sharply as the Primark owner reported a 10% fall in group profits for the first half of its financial year and lowered the full-year outlook for its sugar business.
The Silver Spoon and Billington’s owner guided to a lower-than-expected outlook on sugar due to tariff impacts and weaker bioethanol.
Group sales for the six months to 1 March fell by 2% to £9.5 billion, with Primark growing 1% to £4.5 billion.
Group adjusted profit before tax down 10% to £818 million.
CEO George Weston said: "These results reflect a robust performance in four of our five divisions. I am frustrated with the results in our Sugar business, but we are clear on what needs to be done by way of operational and regulatory solutions to improve financial performance."
For sugar, the FTSE 100 group said profitability was being squeezed by persistent low European sugar prices and an operating loss in the UK bioethanol business, Vivergo.
Further challenges were seen in Tanzania, from an overhang of high imports last year, while South Africa was hit by droughts.
A £40 million loss is expected for the sugar arm in this financial year.
In the bioethanol unit, ABF said the commercial viability of the business is being "undermined" by the way that regulations are being applied to bioethanol, and it is having "constructive discussions with the UK government to explore regulatory options to improve the position".
If these discussions are not successful the plant with either be mothballed or closed.
"The timeframe for recovery in the Sugar segment is longer than we had originally expected due to a slower-paced rebalancing of supply and demand in European sugar markets and a delay in the recovery of profitability in Tanzania."
Weston was pleased with Primark's growth in Europe and the US, though the UK saw continued consumer caution.
The interim dividend was kept flat against the prior year at 20.7p per share.
ABF shares fell 7.5% to 2,072p in early trading on Tuesday.