* Sees substantial growth in year profits and earnings
* Growth heavily weighed to second half of year
* Group H1 earnings 34.4p, beating forecast of 33.5p
* Expects Primark margins to improve in second half
* Shares rise 1.6 percent
By David Jones
LONDON, April 24 (Reuters) - Associated British Foods forecast a "substantial" rise in full-year profits as under-pressure British shoppers turned to its Primark discount fashion stores and it benefited from high sugar prices to fuel a 5 percent half-year earnings rise.
The London-based food and retailing group expects growth to pickup in its second half helped by falling cotton prices at Primark although it saw no help coming for its businesses from currently depressed Western European economies.
Chief Executive George Weston said Primark and AB Foods' sugar business had performed strongly and added that he expects substantial growth in both operating profits and earnings for the full year, largely weighted to the second half.
This confident outlook prompted earnings upgrades for AB Foods' full year, with many analysts looking for 15 percent-plus growth, which pushed the shares -- 55 percent owned by the family of the chief executive -- up 1.56 percent to 1,233 pence by 0902 GMT.
"It has been a good start to the year with a lot more to come in the second half. The UK retail scene is tough but we are more than holding our own and we are confident the year will be good," Weston told Reuters after publishing half-year results.
He added profit growth will be strong in the second half to September as cotton prices continue to fall, the company sees no recurrence of one-off charges at its grocery business, and sugar prices are expected to be strong for the rest of the year.
Weston said the group may get a boost in the UK from the Queen's Diamond Jubilee and Olympic Games this summer but he saw no early gains for the UK economy while inflation was running above sales growth, government spending was being cut and job losses continued.
The group, which sells Silver Spoon sugar and Twining tea as well as running Primark, reported earnings per share rose 5 percent to 34.4 pence in the 24 weeks to March 3 compared to a forecast of 33.5 pence from a Reuters survey of eight brokers.
The half-year dividend rose 8 percent to 8.5 pence a share.
Analyst Graham Jones at house broker Panmure Gordon upgraded his earnings forecast for the full year to September to 85.5 pence a share, implying a 15.6 percent rise compared with his previous forecast for a 14 percent increase.
The group's 233-store Primark chain, which accounts for a third of company earnings, saw sales ahead 15 percent and profits up 2 percent as shoppers looked for bargains and the group avoided the problems of some rival UK retailers who got caught out by a mild autumn and a sudden cold snap in February.
Primark profit margins were trimmed 1.2 points to 9.5 percent, but Weston said he expect them to rise in the second half as cheaper cotton prices feed through. The store chain's profits fell last year due to higher cotton prices.
Sugar profits rose 59 percent helped by strong prices in Britain, Spain and Africa, but grocery profits fell 31 percent due to charges to cover the closure of two small bakeries in the UK at Newcastle and Glasgow, and cost savings -- including jobs -- at its Australian food operations.