The Farsons Group's turnover has increased by 4.6 per cent to €35.3 million in its interim report for the year. The gross profit margin decreased from 23.4 per cent to 21.5 per cent, operating profit amounted to €2.01 million (2007: €2.9 million), and profit before tax amounted to €1.52 million (2007: €3.31 million).
Improved turnover was attributed to increased sales across all business segments; beer sales in particular registered growth in value and volumes. Soft drink sales increased in volume, but sales values per litre decreased substantially. This was mainly due to changes in consumer preferences to one-way packaging as a result of the full liberalisation of the soft drinks market.
The group said the franchise food retail and import businesses continue to perform well, achieving growth in a number of product sectors. Operating profits were impacted by initial efficiency set-up problems encountered with the newly commissioned production lines. These are being addressed, and production efficiencies are now approaching target levels.
Gross margins have also been adversely affected by the advent of illicitly imported beverages, which have not been subjected to eco contribution, and, in some cases, VAT, thus placing the group under significant unfair competitive disadvantage. Farsons has made strong representations to the government on this issue.
Farsons said these interim results were also affected by a lower profit on the disposal of property and an increase in finance costs, the latter as a result of the commissioning of the new soft drinks production line and distribution centre at the beginning of the year. In 2007, before commissioning, interest costs were capitalised.
The group is now operating in a wholly liberalised market in which price competition is acute. The board of directors, through its management structures, is in the course of implementing a permanent cost-reduction programme which will result in a head count reduction of 60 employees within the next 12 months.
These reductions will be achieved through natural and early retirement and voluntary schemes. Reductions in overhead costs will be implemented directly as a result of the capital expenditure programme and reorganisation undertaken over the past two years.