Associated British Foods (ABF) has decided to proceed with the demerger of its retail business, Primark, from its food division, FoodCo.

The FTSE 100 food processing and retailing company said the decision was reached after looking at the financial, commercial, legal and organisational consequences of the demerger, and the board believes it will benefit each business with a “clearer investment proposition” and accountability to shareholders.

Following completion of the demerger, ABF shareholders will hold shares in both listed entities.

ABF said its board is confident in the long-term prospects of both businesses, with Primark and FoodCo earning £9.5bn and £9.8bn in annual revenue respectively.

Chief executive at ABF, George Weston, stated: "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. For Primark, it enables the creation of appropriate governance to maximise the future potential offered by Primark's powerful brand, strong customer proposition and opportunities in existing and new markets."

The update comes as ABF reported a 2% year-on-year drop in its group revenue, which totalled £9.47bn, while its profit before tax fell by 9% to £632m.

Furthermore, its operating profit decreased by 18% to £691m, reflecting continued investment in growth and certain cost impacts more weighted to the first half of the year.

The group said that it has invested £534m in growth initiatives, centred around capacity, capabilities and new technology.

In its outlook, ABF reiterated its guidance for the year, which forecasts its group adjusted operating profit and adjusted earnings per share in 2026 to be below last year.

Following the announcement, shares in ABF fell by over 2%.

Weston added: "We knew the first half of this financial year was going to be challenging and that's borne out in our financial results. However, we still expect improved group performance in the second half.

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."

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