Shares in Glanbia fell 3.27 per cent yesterday to €2.66 after the rise in energy prices and reform of the EU's Common Agricultural Policy contributed to a fall of almost 11 per cent in operating profits last year to €89.15 million.

Pretax profits fell to €62.3 million from €81.91 million after finance costs of €22.3 million, which helped cut its net debt by 17 per cent to €215.7 million.

The owner of the Avonmore and Yoplait brands said that its new international joint ventures were progressing well, but the Kilkenny-based group does not anticipate double-digit growth in its earnings until 2007.

With the ingredients and conumer divisions bearing the brunt of the difficulties, adjusted earnings per share grew by 1 per cent to 20.86 cent in 2005.

Despite "ongoing challenges in Irish operations and unpredictibility in energy prices", the group said it expects earnings per share to grow by 6 per cent in the current year to 22.1 cent.

Managing director John Moloney said he expects earnings per share growth of 10-12 per cent in 2007 as the group reaps the benefit of its international joint venture investments, although the group said "any significant and upward shift" in energy costs would be a cause for concern.

Analysts said the projection for 2007 assumed that Glanbia would maintain profit targets for its Irish business, which suffered last year from inflation, competition generally and the reform of EU supports for the dairy sector.

"Progress towards double-digit earnings per share growth in 2007 remains dependent on Glanbia's overseas joint ventures in both the US and Nigeria performing to plan without any further deterioration in Irish-generated profits," said NCB analyst Paul Meade in a note.

Glanbia said its overall revenues grew by 4 per cent to €1.83 billion. Before exceptional items in 2005 and 2004, its operating profits fell 7 per cent to €80.6 million. The group declared a final dividend of 3.24 cent per share, in addition to an interim dividend of 2.27 cent, lifting the overall dividend by 5 per cent to 5.51 cent.

Mr Moloney told reporters that the group had come close to making an acquisition last year in its nutritionals division but said it takes "two to tango". He said the group could spend €80-€100 million on an acquisitions and it was examining opportunities in the US and Europe to acquire groups with a turnover in the €50-€60 million range.

The nutritionals business is part of Glanbia's food ingredient division, its biggest, with operations in Ireland the US. The division makes cheese, butter, dairy spreads and whey protein ingredients. Revenues grew by 3 per cent to €1.11 billion, but operating profits fell 8 per cent to €42.75 million and the operating profit margin fell by 40 basis points to 3.9 per cent.

The drop in divisional profits was a consequence of difficulties in Ireland and rationalisation costs of €2.6 million. The US operation performed well, with profits and margins rising after the commissioning of a big new cheese plant in New Mexico.

Glanbia said challenging retail markets and milk imports from Northern Ireland were instrumental in a 3 per cent fall to €27.14 million in operating profits in the consumer division, its second largest. Revenue grew 9 per cent to €493 million but the operating profit margin declined by 70 basis points as a positive contribution from the pigmeat business was offset by €11.9 in rationalisation costs and "competitive" conditions in the liquid milk and chilled food division.

A difficult year in the agribusiness division was blamed on poor grain markets and changes in farm purchasing patterns. Revenue grew 1 per cent to €229.14 million and operating profits fell to €10.68 million.

Mr Moloney said the group's landbank could realise €3-€4 million per year as Glanbia seeks to exploit the property boom.