Associated British Foods (ABF) is expecting its proposed Hovis acquisition will enable a turnaround of its UK bakery business following another loss-making financial period.
In a second half trading update to 13 September 2025, ABF reported that Allied Bakeries – which produces Kingsmill, Allinson’s, and Sunblest bread brands as well as own label lines – had encountered “lower sales and an operating loss in a challenging market, as expected”.
However, it noted an anticipated return to profitability through its proposed acquisition of Hovis, which was confirmed last month subject to regulatory approval. Hovis reported a 8% drop in sales with losses deepening during its most recent financial year.
“By combining the production and distribution activities of the two businesses, we expect to drive significant cost synergies and enable innovation to create a sustainably profitable business,” wrote ABF in its report.
Despite volume-led growth from its Twinnings tea brand and Ovaltine price increases driving a rise in revenue, ABF said its Grocery adjusted operating profit from H2 would likely be slightly below its previous expectations. This was mostly due to one-off restructuring costs, it added.
Meanwhile, its yeast and bakery ingredients business AB Mauri was said to have continued to have “good underlying growth in most markets”, having benefitted from last year’s acquisition of North American speciality yeast and technology business Omega Yeast.
Overall sales growth of its Ingredients division was impacted by currency devaluation and an easing of inflation in Argentina, and its portfolio of speciality ingredients businesses, ABFI, performed well particularly in enzymes and health & nutrition sectors.
ABF’s Sugar business in the UK and Spain declined significantly in H2 as a result of persistent low European sugar prices and a high cost of beet. Its actions to reduce its beet manufacturing footprint in Spain, along with its decision to close its Vivergo bioethanol plant near Hull, is expected to result in restructuring costs and impairment charges of approximately £200m, of which £50m are cash costs to be incurred this current financial year and into next year.
“I’m pleased with how the Group has performed in the second half of our financial year in what continues to be a challenging environment, characterised by consumer caution, geopolitical uncertainty and inflation,” commented ABF chief executive George Weston. “Against a backdrop of continued volatility in 2026, we will start to see the benefit from our recent actions and continued investment.”
ABF, which also owns fashion retail chain Primark, is to announce its FY25 annual results on 4 November.
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