Associated British Foods has warned that grocery profits will be “substantially lower” in the first half of its financial year.

The company said sales would be ahead of last year but that the cost of restructuring at Allied Bakeries in the UK and George Weston Foods in Australia would weigh on profits.

At Allied Bakeries, which makes Kingsmill bread, the closure of two small bakeries increased costs in the six months to 3 March. Over the same period, a high level of promotions hit Kingsmill’s margins.

Meanwhile, ABF said profits from its sugar division would be substantially ahead of last year, thanks to high beat yields in Spain and an increase in UK sugar production – up to 1.3 million tonnes from 1 million tonnes last year.

Overall, ABF – which also owns clothing retailer Primark – said trading over the past six months had been in line with expectations.

Brokerage firm Panmure Gordon said it expected profit before tax to grow by 1.7% over the first half of the year to £359m, as improved sugar profits offset declines in grocery profitability caused by restructuring charges that it forecast would approach £30m.