Lower earnings from sugar and soaring energy costs will restrain profits at Associated British Foods, the company has warned.
AB Foods brands include Silver Spoon sugar
AB Foods, which owns discount clothing chain Primark, said energy will cost it £7m more in the second half of 2006.
Greater world competition will cut prices for sugar, which accounts for 20% of AB Foods profits, it said.
AB Foods is expected to report annual profits of about £545m on 16 September, down from £590m in 2005.
High Street hopes
The reduced profits from sugar have been triggered by reform in the global market, with the European Union reducing subsidies for sugar beet production.
Sales at Primark are steaming ahead, owner AB Foods says
AB Foods owns the Silver Spoon sugar label. It plans to close two of its six sugar beet factories during 2007.
However, Primark remains a strong draw for UK consumers, with sales at the retailer up by 3% over the year.
"Primark is going like a train", AB Foods finance director John Bason said.
The clothing chain accounts for 30% of AB Foods profits and Primark continues to expand.
New Primark outlets, including its first store in Spain, are being opened at a rate of one a week, AB Foods said.