Agribusiness group Glanbia saw profits slip 5 per cent in the first half of what the group has called a year of transition.

The company's cheese and ingredients operations in the United States performed strongly in the six months to July 3rd, 2004.

However, its Irish pigmeat unit underperformed already low expectations.

Group sales fell 7.3 per cent to €974 million, largely due to divestments. Stripping out the effect of businesses no longer part of the group, turnover was ahead 9.2 per cent.

Operating profit was down 11.8 per cent at €40.3 million. Pre-tax profit was €35.7 million compared to €10.7 million in the same period in 2003. However, once €26.9 million in exceptional charges from last year are discounted, pre-tax profits were 5 per cent down.

The company said that, despite a "challenging" first six months, it was on track to meet its expectations.

Glanbia has completed the restructuring of its UK operations with the sale of 75 per cent of its cheese operations, Glanbia Foods, a factor that has helped it pay down debt.

Interest on debt amounted to €4.5 million. The substantial decline from last year's equivalent figure of €8.2 million was a significant contributor to the bottom line. Interest is covered 8.9 times in the first period, up from a multiple of 5.6 last year.

On the development side, joint ventures it has established in New Mexico and Nigeria have yet to come on stream and it will be the latter part of next year before either makes a contribution.

Group managing director Mr John Moloney expects pig processing to improve in the second half. He said the industry was at the bottom of the cycle and had suffered from overcapacity and inefficiencies. Glanbia has invested in both its pig processing plants which, from October, will be able to process 25,000 animals a week.

Dairygold's departure from the business should raise capacity utilisation from 82 to 92 per cent.

Mr Moloney was confident of meeting year-end forecasts for the group and restoring margins to 4.5 per cent from the 4.1 per cent figure in the first half.

The company sees the investment in nutritional products derived from the dairy business as a key driver of future growth.

Brokers gave a muted response to the figures. NCB analyst Mr Paul Meade said the performance of the group's Leprino mozzarella joint venture in the UK, in the face of growing competition, was disappointing.