Associated British Foods has forecast flat revenue from its grocery division in the first half of its fiscal year amid challenging conditions in bread markets in the UK and Australia.

ABF, which owns the Kingsmill bread brand in the UK and sells bakery products in Australia under brands including Tip Top, said today (25 February) its first-half grocery sales “were expected to be level with last year”. Revenue from ABF’s grocery unit, which also sells Jordans cereal and Ryvita crisp bread, was GBP1.81bn in last year’s first half, up 4% on the prior-year period.

In a trading update for the six months to 2 March this morning, ABF said the UK bread market “remained highly competitive”. It said the poor weather had hit wheat volumes but insisted it had recovered higher costs through price increases.

The company said it had also secured price hikes in Australia but admitted the bread market was “difficult” amid a “high level” of in-store bakery promotions.

First-half profits from ABF’s grocery business are set to be “substantially improved” on last year as the numbers will not include restructuring costs booked in the figures a year ago.

Elsewhere, ABF said first-half earnings from its sugar business would be lower thanks to charges from mothballing two factories in China. The company has seen “unusually low” sales volumes in China.

Group results will be “ahead” of the company’s forecasts thanks to an “outstanding” performance from discount clothing chain Primark.