Golden Vale has posted interim results showing a 12 per cent increase in operating profits to €19.4 million on a turnover of €391 million, down 2 per cent on the first half of last year.

Pre-tax profits at the dairy and foods group increased by 14 per cent in the first six months to €17 million. Group net borrowings increased by €21.3 million to €84.1 million. Borrowings were driven by capital expenditure of €29.9 million and usual seasonal increases in working capital of €14.4 million, according to the group.

Sales of butter and milk powders increased by 11 per cent to €158 million. The largest division, consumer products, showed a 6 per cent decrease in turnover to €208 million. Operating profits on butter and milk powders increased sharply - by 500 per cent because of improved marketplace returns, while the margin on consumer products rose by 8 per cent.

The agri-trading division performed poorly, with turnover down 29 per cent to €25 million and operating profit down 27 per cent to €1.6 million.

Favourable weather is blamed for the poor sales of animal feeds in the first six months of the year.

The board has declared an interim dividend of €1.17 (92p) per share, an increase of 7 per cent on the 1999 interim dividend.

During the period, major capital projects including the frozen snacks facility in Enniskillen, Co Fermanagh, the Rye Valley frozen meals plant in Carrickmacross, Co Monaghan and the processed cheese facility in Coleraine, Co Derry were substantially completed.

The decrease in overall sales resulted from the elimination of an unprofitable business in the Netherlands, the sale of the margarine business in Denmark and the agri-trading business in Northern Ireland.

In the consumer products division, sales of cheese, spreads and long-life products were down to €126 million, compared with €139 million in the same period last year. Turnover in prepared meals was up marginally from €32 million to €34 million.

Liquid milk and the group's cream liqueur business showed a 4 per cent drop in turnover to €48 million.

In commodities, the market price increases were helped by some volume increases and the operating margin improvement of 9 per cent arises from the higher market prices combined with the benefit of cost reductions from rationalisation undertaken in 1999.

The group said that a major upgrading of the Charleville milk processing plant is under way and will be completed later this year.

Commenting on the results, group managing director, Mr Jim Murphy, said he was confident of delivering a positive outcome for the full year.

He warned that the market environment in consumer products remains extremely competitive and would require a continuous focus on costs and efficiencies to maintain margins. He added that while there currently is an improvement in milk processing the fundamentals remain unchanged. At a wider level, the industry as a whole needs restructuring to deliver cost reductions and avoid duplication of capital expenditure, he said.