Shares in IWP came under pressure yesterday after the company said it would not meet earnings expectations for this year and would be forced to breach its banking covenants.

A breach of the firm's agreements with its bankers would cost about €16 million, chief executive JJ Murphy said in a statement. This would be a substantial sum for IWP, which reported a loss of almost €5 million in its most recent half-year results.

The personal care group said it would address the €16 million charge as part of refinancing negotiations with its lenders.

The firm has taken on Goodbody Corporate Finance to handle the negotiations, a restructuring of its debt and a review of its capital structure.

"The board is cognisant of the interests of all its stakeholders and is committed to achieving a capital structure which will enable the company's operations to continue to develop and grow earnings," said Mr Murphy.

IWP should make progress with its operating performance this year, he added.

Trading has been difficult since the end of March, particularly in the UK market, according to yesterday's statement.

The company told the market two months ago that its performance in the year to the end of March would fall short of expectations because of difficult trading since Christmas.

The most pressing problem, however, is the probability that IWP will breach some of its banking covenants before completing refinancing negotiations. It said yesterday that its lenders were aware of this, which forms part of the current negotiations.

"The board remains confident of the continued support of its lenders and is aiming to complete these discussions as quickly as possible," said Mr Murphy.

IWP restructured roughly €82 million in debt a year ago after a number of earlier covenant breaches. At that stage, the company said the new arrangements would provide it with sufficient funds to see it through until the end of March 2006.

That agreement involved IWP's lenders, which include AIB, waiving action over the earlier breaches.

NCB analyst Paul Meade said the update was not surprising in light of the recent experience of other UK personal care companies. He said his forecast for the firm of break-even for 2006 was no longer realistic.

IWP shares closed at 10 cent, down two cent. They touched a low of 8 cent in early trade.