Associated British Foods has reported a slowdown in growth in its grocery business, while sugar sales continue to boom thanks to high prices.

Total grocery sales rose 4% in the first quarter to 7 January, having grown by 7% in the previous financial year. Associated highlighted strong global sales for Twinings Ovaltine, while describing UK sales as “encouraging”.

“Sales by the UK grocery businesses were also encouraging, particularly in Allied Bakeries, where Kingsmill achieved growth,” said ABF.

However, the high level of promotions meant on Kingsmill meant margins were hit.

Meanwhile, Associated celebrated a bumper 21% increase in sugar sales, buoyed by high prices in Europe and strong sugar beet crops in the UK and Spain.

Overall group sales, which also include the Primark clothing chain, rose by 12%.

“The statement is ahead of our estimates on the top line but despite this, guidance on margins and earnings continues to be cautious for 2012,” said Bernstein analyst Andrew Wood.

Associated said it expected “profit improvement” to be weighted towards the second half of the year as commodity costs ease.