Associated British Foods booked flat first-quarter sales as the continuing strength of Primark offset a further deterioration in sugar.

The retail-to-grocery manufacturer reported a 28% decline in revenue from its sugar business in the 16 weeks to 4 January. A weakening European sugar market resulted in lower selling prices. Beyond Europe, ABF also reported sales softness in China and South Africa. The group warned on falling global sugar prices which it said “may put further pressure on revenues and margins”, particularly in China.

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In grocery, which accounts for 29% of total sales, revenue excluding currency exchange rose 2%. However, due to the weaker Australian dollar, total net sales actually dipped 1%. Twinings Ovaltine “again performed well”, while volumes and margins at UK bread arm Allied Bakeries improved despite “strong competition”. Lost contracts and lower selling prices hit revenues at the group’s consumer branded sugar unit Silver Spoon, management added.

Primark, ABF’s discount clothing retailer saw sales rise 14% on the year.

However, Sanford Bernstein analyst Andrew Wood emphasised that even Primark’s growth rate represents something of a slowdown on last year’s levels. “While Primark growth continued to lead the way for ABF, it did slow considerably from 2013…and total company sales growth was flat for Q1 with all other businesses delivering either flat or negative sales growth,” he wrote in an investor note.

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Management issued a cautious outlook for its full year, with a “substantial” reduction in sugar profits expected to mean earnings in-line with 2013 levels. 

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ABF shares has fallen 4.49% at 13.20 GMT today.