UK food processor Associated British Foods (ABF) has provided a trading update for the first half of the financial year, reporting that profits from its sugar category were below its expectations.

The company’s grocery category reportedly “performed well”, as ABF expects sales growth to be around 3% in H2. It said its UK-focused brands “generally performed well”, while international brands delivered “good growth underpinned by upweighted investment in effective marketing”.

ABF reported that its ingredients sales had “grown well” in H2, while its sugar business had been “mixed”. The company said that it expects the sugar category to deliver an adjusted operating profit of approximately £200 million, which, while ahead of the previous year, would be lower than anticipated due to a reduction in European sugar pricing.

For its agriculture category, ABF expects a slight decrease in sales due to “continued soft demand” for compound feed in the UK and China, but said its feed and additives business were “performing well.

George Weston, CEO of ABF, said: “The Group has continued to perform well in the second half, delivering good topline growth, a significant improvement in profitability and excellent cash generation.

“Strong margin delivery is enabling increased investment in our product, digital and brand initiatives. Grocery and ingredients have also grown well in the second half, in line with our expectations, and we will continue to build on this momentum. Sugar profitability this year remains ahead of FY23, however, it is below our previous expectations. This is due to a sharp fall in European sugar prices which is now expected to impact sugar profitability in FY25 before recovering in FY26.

“Notwithstanding this short-term volatility in sugar, we are optimistic about the outlook for the rest of the Group, which is well positioned for further strategic progress supported by continued reinvestment for the longer term.”