PRE-TAX profits at Greencore fell by 9 per cent to £49.7 million for the year to end September in what the company described as a "challenging" year.

But chief executive, Mr David Dilger, said trading conditions had improved as customers took advantage of the improved competitiveness of the pound against sterling and with a good beet processing campaign in progress.

The impact of weaker malt markets is being offset by lower raw material prices, cereal markets are recovering and the company's associates are trading well, he said. Group sales rose by 1.7 per cent to £466.9 million with sales in the second half up 10 per cent after a difficult first half. But operating profits were 6.6 per cent lower at £46.6 million, bringing group margins down to 10 per cent from 10.9 per cent.

Associates - Imperial Holly in the US which was included for a full year, Kears in Britain (for nine months) and Greencore's sugar, molasses and yeast interests in Britain - contributed £10.1 million, up from £5.3 million.

The contribution from associates increased group operating profits to £56.7 million from £55.3 million.

But an exceptional charge of £7 million from the EU fine for anti-competitive and interest costs of £1.3 million reflecting the financing costs of the Imperial Holly and Kears deals, reduced the pre-tax outcome from £54.6 million to £49.7 million.

Earnings per share were 12 per cent lower at 22.4p. Despite the fall in profits shareholders are to get a 13.3 per cent increase in the final dividend to 5.1p per share bringing the total dividend to 7.7p per share.

In the sugar division sales fell by 1.5 per cent to £136.8 million while operating profits were 6.1 per cent lower at £25.6 million, pulling margins down to 18.7 per cent from 20.2 per cent.

An eight-week strike and three green pound devaluations had a negative impact on the outcome.

Despite the poor profits performance the division still has a strong return on assets at 32.8 per cent, down from 41.6 per cent. Sugar division profits are expected to recover in the current year.

Greencore is benefiting from an increased demand from sugar and flour confectioners who are getting the benefit of the competitiveness of the pound against sterling, Mr Dilger said.

In addition, beet throughputs at Carlow are at record levels and are higher in Mallow.

The current beet processing campaign will be shorter and more effective and will reduce the cost per tonne of sugar, he said.

In the agribusiness division sales were 12.1 per cent lower at £147.5 million.

Operating profits dropped 43.5 per cent to £6.9 million reflecting weak animal feed and a currency related drop in cereal prices. Margins fell from 7.3 per cent to 4.7 per cent.

The outcome was affected by a partial boycott of the fertiliser business by the Irish Farmers Association.

But the food division performed well with a 16.8 per cent rise in sales to £182.6 million and a 36 per cent increase in operating profits to £14.1 million. Margins rose from 6.6 per cent to 7.7 per cent.

There was good growth in flour sales, up 8 per cent in volume terms, and in malt and consumer foods sales.

The Greencore group sold its 67 per cent stake in Swissco and acquired a controlling interest in British bakery, Kears, during the year.

For the current year, malt output has been fully sold for 1997/ 98 and raw material requirements have been filled at more realistic prices, he said.

At the end of September, Greencore had cash of £58.8 million, up from £32.8 million and shareholders funds of £255.8 million.

Gearing - borrowings as a percentage of shareholders' funds - was a low 7 per cent.

Last year, Greencore had to tackle a number of issues in the long-term interests of shareholders, Mr Dilger said.

This year, the company will resume normal earnings' growth targets by continuing to reduce costs in food processing and agribusiness and building margins through increasing productivity, product development and building brands.