Associated British Foods (ABF) has reported a decline in profits for its grocery and ingredients divisions, despite an 11% rise in group revenue to £12.3bn.

The firm revealed the news in its year-end financial results this morning, for the 52 weeks to 15 September 2012, with adjusted ebitda increasing by 17% to £1.07bn.

However, ABF’s grocery division, which includes UK bakery brands Kingsmill and Ryvita, saw a drop in profits from £244m to £187m for 2012, which has been attributed to significant restructuring changes at Allied Bakeries, as well as in its Australia operations.

ABF’s ingredients business reported a fall in profits from £61m to £32m in the 52-week period, mainly due to restructuring changes at AB Mauri and increases in raw material costs, particularly in European markets.

Charles Sinclair, chairman of ABF, said: “This year was not without its challenges, as evidenced by the results of our grocery and ingredients business segments. Although Twinings Ovaltine delivered another good result with continued growth, particularly in its developing markets, a mix of strong competition, a continued strain on consumer spending and high costs for a number of commodities led to lower profitability in both of these segments.”

He added that global economic uncertainty would affect the outlook for the company’s 2013 financial results, including increasing commodity costs, particularly for cereals.

Graham Jones, executive director, equity research, at Panmure Gordon, said: “We believe higher wheat prices have been largely recovered, and 2013E grocery sales will also be boosted by volume gains with The Co-operative. We forecast a recovery in profits in 2013E to £242m, broadly back to the level seen in 2011A.”

AB Sugar saw a 62% increase in profits to £510m while UK production rose by 30% to 1.3 million tonnes.

“We forecast ebitda to moderate somewhat to £455m in 2013E reflecting a lower crop in the UK, coupled with higher beet costs, although EU sugar prices are expected to remain firm,” Jones added.

George Weston, chief executive of ABF, said: “These are very good results for the group and include exceptional performances from AB Sugar and Primark. Global economic uncertainty remains, but we have opportunities for further investment and the strength of the group balance sheet and a strong cash flow will enable us to pursue them with confidence.”

The firm has predicted that it will see a reduction in profit from AB Sugar in the next financial year, as a result of lower EU production, which it claims will be more than offset by further growth at Primark and some recovery in its grocery division.