Kingsmill maker Associated British Foods reported a rise in group revenues for the past six months but warned that sugar production costs would weigh on profitability in the second half of the year.

Group sales were up 9% to £5.21bn in the 24 weeks to 5 March, while pre-tax profits slipped slightly to £319m, down from £320m the previous year.

Increased volumes and market share for Allied Bakeries’ flagship Kingsmill brand helped grow sales at its grocery division by 8% to £1.73bn, with profits up 17% to £111m. But margins came under pressure from the continued rise of wheat costs.

New plant bread lines are being built in the Glasgow and Stevenage bakeries, the company said today, while a new rolls plant has been commissioned at the West Bromwich bakery. Associated's Ryvita factory in Stockport is on track to transfer to an expanded site at Poole by the summer, the company said.

Improved performances in Spain and China for the group's sugar business offset declines in the UK, as profits for that arm of business grew from £85m last year to £108m this term.

“The higher cost of UK sugar production this year and the cost of third-party sugar purchases will affect second-half profitability,” warned Associated chairman Charles Sinclair.

“We continue to expect good revenue growth for the full year, although adjusted earnings are now expected to be similar to last year’s very strong result.”

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