Shares in Associated British Foods dipped this morning (6 November) despite rising annual profits, as the UK group issued a note of caution on rising commodity costs.

The Kingsmill bread-to-Twinings tea maker saw full-year profits rise 11% but warned that high raw material costs would put pressure on margins.

ABF posted adjusted operating profit of GBP622m (US$1.3bn) to 15 September, up 11% on the year. Turnover rose 13% to GBP6.8bn.

The company pointed to rising profits from its sugar operations – boosted by last year’s acquisition of a stake in Illovo Sugar in Africa – as well as rising earnings from its Primark clothing retail business.

In September, ABF had warned that problems at its grocery businesses would weigh on earnings. Today, the company said there had been “good progress” from “many” of its grocery businesses but admitted its Allied Bakeries business in the UK had performed “poorly”.

ABF chief executive George Weston said “major investment” in capital expenditure and acquisitions had driven the company’s results. In the last 12 months, ABF has added to its stake in the Illovo business with the acquisitions of the Patak’s Asian cuisine brand and UK cereal firm Jordans.

“I am very encouraged that the considerable progress made places us well for growth in the future,” Weston said.