Kingsmill owner Associated British Foods (ABF) has seen grocery profits rise, despite a fall in sales and “challenges” within the UK bakery market.

First-quarter profits in Associated British Food’s grocery business have risen on the back of market share growth in its UK bakery business and cost efficiencies elsewhere in grocery, despite a fall in sales.

The Kingsmill brand owner said in the update that operating profit in grocery for the period ending 27 February increased to £130m, up from £128m year-on-year (YOY), but sales fell from £1.58bn to £1.52bn YOY.

The UK bakery market is where the firm has experienced “challenges”, which it said was due to increased competition and promotional activity.

ABF said that, in the first quarter, it had seen Kingsmill grow market share “with a substantial increase in sales volumes, and strong consumer demand for alternative bakery products”. Its Sandwich Thins performed particularly well.

ABF as a group increased profits for the period, thanks to the absence of one-off items booked in the same quarter last year.

Net profit came in at £360m, up from £124m, and operating profit increased to £477m compared to £353m.

But revenues fell to £6.1bn, down from £6.2bn, which the company said was because of continued challenges in its sugar business (including reforms to the European Union market), as well as lower sales in its ingredients and agriculture units.

It said in the statement: “Profit margins improved in grocery and agriculture. Profits were well ahead in ingredients, and sugar delivered a better result, albeit still at a low level.”

Earlier this month, ABF spent £262m to buy up the remaining stake in Illovo Sugar, the largest sugar producer in Africa.