Associated British Foods has warned its sugar business will remain under pressure until 2016 amid declining prices and lower volumes.

In the year to 13 September, sugar revenues fell by 22% year-on-year to £2.08bn and adjusted operating profit plunged by 56% to £189m.

Saying stabilisation is expected in the 2015/16 financial year, ABF CEO George Weston added: “We think the bulk if not all of the price reductions are now behind us and the amount we’ll be paying to farmers for sugar beet comes down in 2016.”

The sugar division again put a dampener on Primark’s continued growth, up 16%, bringing group revenue down 3% to £12.9.bn, though up 1% on a constant currency basis.

There was better news for ABF’s recovering grocery division, which saw revenues drop by 6% but margins rising to 8.1% from 6.3% on strong performance in the US and Australia.

Analysts at Jeffries have raised concerns over the “risks to ABF’s grocery EBIT (25% of group total, with a third earned in the UK) from the major changes currently undergoing in the domestic retail channel”.

But Weston remained bullish about UK prospects, noting: “We’ve just come off a super year for the grocery business.

“Of course there are challenges in the UK, but we’ve got a very good ­collection of branded positions,” made stronger with the acquisition of Dorset Cereals, and the performance both in and outside the UK has been creditable.”

ABF shares rose 4.2% to 2,783p after it announced its results on Tuesday.

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