A SURGE in sugar revenues drove increased sales growth for Associated British Foods during the group’s third quarter, it reported today.

Revenues from the sugar division, which includes the British Sugar beet processing business in the UK, grew by 54% in the 16 weeks to June 23, boosting growth for the first 40 weeks of the group’s financial year to 28%.

The increase offset a fall in growth at the group’s agriculture division, where sales rose by 10% during the third quarter compared with 15% for the 40 week period.

Revenues within the group’s grocery division were flat during the latest period, compared with growth of 3% for the year so far, and sales of ingredients dipped by 2%, although they remained 1% ahead for the year to date.

Sales growth at the group’s Primark budget fashion chain also eased slightly, to 13% in the third quarter against 14% for the year to so far, but overall sales were 13% ahead during the quarter, lifting growth for the first 40 weeks to 11%.

ABF said the increase in sugar revenues reflected a “strong commercial environment in Europe and to a lesser degree in Africa”, although it warned that prices in China had continued to fall since the half-year stage.

The group said that, as forecast in its half-year results, the UK beet campaign has produced 1.3milllion tonnes of sugar, compared with just short of 1million tonnes last year.

In Spain, the northern beet campaign has been successful, with the refinery operating at close to capacity, and the southern campaign was progressing well.

The season for Illovo, its African sugar business, was also now under way, the group said, with production expected to be ahead of last year, although a currency devaluation in Malawi in early May would have a negative impact on profit when translated into Sterling.

Further progress had been made in the north of China, with sugar volumes increasing from 200,000 to 300,000 tonnes, while volumes in the south with level with last year at 400,000 tonnes.

ABF said the reported 14% year-to-date sales growth at Primark had been affected by recent weakening of the euro, with sales 16% ahead on a consistent currency basis.

Trading at Primark in the third quarter had been “good” in the UK and Ireland, apart from April when the wet weather hit sales, and trading in continental Europe “remained healthy”.

As expected, operating margins were improving in the second half, reflecting lower input costs, it added.