Associated British Foods (ABF) – the parent company of Allied Bakeries and AB Mauri – has reported it is on track to turn out profits in line with earlier predictions.

However, the group warned that interest expenses will be greater in its second half as a result of higher-than-average net borrowings. It also reported that while AB Mauri, its yeast and bakery ingredients division, had maintained revenue growth, its operating profit would be “sharply lower”.

In its pre-close statement it also said that in the UK, Allied Bakeries had “traded well”.

ABF said: “The European yeast market has been extremely competitive and margins have suffered from an inability to recover fully raw material cost increases. Some weakness in the bakery industry in North America led to lower sales of wet yeast and higher-margin technical bakery ingredients, and full recovery of higher input costs was consequently challenging. In China, raw material costs rose, as molasses, which were in short supply, were supplemented with higher-cost corn syrup.”

But it added: “Our performance in Latin America was encouraging, benefiting from strong economic growth and continued development across a broadened range of products. Significant raw material cost pressure was successfully offset by price increases. Bakery ingredients had another year of strong revenue growth, particularly in the UK, with an expanded product range. Considerable progress was made in building relationships with key global customers, and technical innovation continued to drive new product development, enabling us to maintain technology leadership in key markets.”

Commenting on Allied, it said it had been supported by a “strong advertising and marketing programme”, but warned margins had been hit by this increased promotional activity and “partial recovery of higher wheat costs”.

It also experienced strong growth in its 50/50 range.