Associated British Foods PLC (LSE:ABF) has made a series of changes that could bring a sweeter outlook for its sugar division, but Deutsche Bank is keeping its expectations in check.
The group is pushing ahead with measures outlined at its half-year results in April, which Deutsche views as “positive steps”. These include the closure of its Vivergo bioethanol plant and a restructuring of its sugar operations in Spain.
According to Deutsche’s analysts, this could result in a profit boost of around £60m in the 2026 financial year, equivalent to roughly 3% of group earnings before interest and tax.
The rationale is clear. These parts of the sugar business have slipped into losses on more than one occasion, and while the preference is always to improve profitability and protect jobs,
Deutsche stresses the importance of maintaining capital discipline. In this case, shutting down unproductive assets is seen as the most viable route to stabilising the division.
There will be some cash costs tied to the closures, but management appears focused on long-term benefits. Notably, guidance for the group’s broader sugar operations, which include Illovo in Africa, remains unchanged despite unhelpful weather conditions.
That stability has been welcomed by the German bank, even if the update itself holds few surprises.
At a group level, the story for AB Foods is about holding steady in the short term while preparing for a stronger year ahead.
The shares are trading at around 10 times calendar 2026 earnings, which Deutsche believes reflects much of the near-term risk.
The bank maintains its “hold” rating on the stock with a price target of 2,220p, compared with a recent close of 2,080p.
The market appears to be waiting for clearer signs of recovery across the group’s businesses, which span everything from Twinings tea to Primark. That makes disciplined restructuring in the less glamorous corners of the portfolio all the more important.
With the sugar division gradually being reshaped and group guidance intact, the outlook is relatively stable.
But for now, Deutsche’s stance suggests the shares are fairly priced given the known risks and limited earnings momentum in the short run.
The shares were down 1% at 2,061p.