Avonmore Foods and Waterford Foods have reported contrasting fortunes in their final half-year periods as independent companies. Avonmore's pre-tax profits rose almost 30 per cent to £17 million while Waterford's half-year profits fell 26 per cent to £7.8 million.

The results from both groups were broadly in line with analysts' expectations, with the Waterford fall in profits accentuated by a £2 million cost for rationalisation at Premier Dairies and Waterford Dairies.

Waterford's operating margins in its dairy business were actually higher than Avonmore - 3.6 per cent against 2.4 per cent - while through the entire business, Waterford's operating margins of 4.1 per cent where higher than the 3.2 per cent at Avonmore. The combined operating margin was 3.6 per cent, some way short of the 5 per cent margin target set for the merged operation.

Avonmore's operating profit was 14 per cent higher on sales up just 1.8 per cent to £647.2 million, with growth in both the dairy and meat divisions balanced by a fall in agri-trading sales.

The dairy market in Ireland was hit by lower product prices which were not reflected in milk purchasing costs. The British liquid milk business reinforced its position with the multiples but the Golden Foods mozzarella business was affected by the strength of sterling and imports from the continent.

Avonmore's American dairy operations were hit by lower cheese margins, but with a new whey plant now in operation, the US subsidiary is producing record volumes of cheese and food ingredients.

The meat division enjoyed a strong recovery, especially in its pigmeat operations where pig prices have fallen back from the record 148p a kilo they reached after Unigate went aggressively looking for pig supplies last year.

That move by Unigate has led to a major restructuring in the Irish pigmeat industry with the cloasure of the McCarrens and Dawn Meat pigmeat operations. As a result, Avonmore has been able to increase its pig kill from 20,000 to 26,000 a week.

The beef industry, however, remains difficult with markets not recovering from the impact of BSE. Mr O'Neill was emphatic, however, that there was no question of Avonmore-Waterford leaving the beef business. "We've heard the rumours and they have absolutely no foundation. It won't happen," he stated.

Waterford does not have any meat business, and the higher margins in its dairy business reflect the greater level of consumer products compared to Avonmore. The fall in operating profits in the dairy division was largely due to the £2 million charge for rationalisation costs at Premier and Waterford Dairies.

The liquid milk business was hit by delays in the consolidation of the Premier business to Rathfarnham.

The extent of Waterford's debt is illustrated by its £10.8 million interest charge, a charge that was covered less than twice by operating profits.

Overall, no great improvement is expected in the second half of the year. "The individual half-year results reflect some adverse trends in operational performance which are likely to continue for the full year," Mr O'Neill said.