Shares in Associated British Foods have slipped back 4.7% so far today to 2,735p after the Primark and British Sugar owner posted a 51% slump in pre-tax profits in its first half.

The group has been hit hard by the massive decline in sugar prices across the world in the past year, as well as by general food deflation and a weakening euro.

Revenues at ABF nudged up 1% to £6.25bn in the 24 weeks to 28 February, but its pre-tax profit more than halved to £213m

AB Sugar slumped to a £3m operating loss for the period, compared with a profit of £64m a year ago, as pressures continue ahead of the abolition of production quotas in 2017. Turnover in the division fell 10% in the period to £928m, but ABF did predict the sugar business would make a “small profit” for the full year.

However, agriculture, grocery, ingredients and the retail business – which includes Primark –all registered growing earnings.

Primark sales were 12% ahead of a year ago to £2.55bn, pushing up operating profit 8% to £322m. Grocery, which includes Twinings Ovaltine, saw a 4% rise in operating profits to £128m despite revenues falling 4% to £1.58bn because of commodity price deflation. Agriculture suffered the same fate, with earnings up 21% to £23m with sales down 8% to £577m.

CEO George Weston said: “This is a sound trading result with significant progress made in operating profit by Primark, agriculture and ingredients, and further improvement in grocery’s margin.

“As expected, profitability at AB Sugar was substantially lower as a result of much weaker EU sugar prices. Primark’s performance was driven by significant expansion of selling space and superior trading by the stores opened in the last 12 months and plans for its entry into the north-east of the US are well advanced.”

However, chairman Charles Sinclair sounded a more cautious tone to investors. At the bottom of his review of the half, he said there would be a modest decline in adjusted earnings per share for the full year.

“With sterling’s continuing strength against most of our major trading currencies, and the transactional impact of euro weakness on the results of Primark and British Sugar, we now expect a modest decline in adjusted earnings per share for the group for the full year,” Sinclair added.

The trading outlook for the year remained unchanged as Primark’s European expansion and sales growth continued and plans for its entry into the North East of the US advanced.

Liberum analyst Robert Waldschmidt said ABF was in a year of transition as the hit to sugar profitability is absorbed by strong growth at Primark and the profits recovery at ingredients.

“The shakeout in EU sugar ahead of the abolition of sugar production quotas is quickly playing out in FY15 with a hefty 40% fall in EU sugar prices hitting industry profitability,” he added. “While prices could fall further, there are early signs of prices starting to stabilise.”

Liberum has a ‘buy’ rating on ABF’s shares, with a target price of 3,600p.

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