Drinks group C&C has announced an extensive restructuring and cost reduction programme, as summer rain and reinvigorated competition from Scottish & Newcastle saw its first-half operating profits decline 33 per cent.

Operating profits plunged to €67.9 million for the six months to the end of August, as the company failed to build on the success of its Magners cider brand in Britain last year and was forced to issue two profit warnings.

Turnover for the period was flat at €375.6 million, while earnings per share fell almost 40 per cent to 17.5 cent. A 50 per cent increase in marketing spend left the company vulnerable to any declines in sales volumes.

"Unusually poor" weather and a successful copycat advertising campaign from its rival, Scottish & Newcastle, meant that sales volumes of Magners cider in Britain grew by just 2 per cent in the period. In Ireland, volumes of Bulmers cider fell 7 per cent. Operating profits in the cider division fell 36 per cent as a result, with margins shrinking from 33 per cent to 21 per cent compared with the same period in 2006.

A "high single-digit" percentage fall in cider revenue is now expected in the second half of the year, compared to the second half of the previous year, as the wet summer meant it was unable to recruit new drinkers.

C&C chief executive Maurice Pratt said the collapse in demand for cider after a summer heatwave in 2006 had been "a considerable hit", given the increase in capital investment and marketing spend that the group had made.

C&C has invested €115 million in extending the capacity of its Clonmel plant, mostly to serve the bottled pint market in Britain, although this investment is less than the €200 million originally planned. It is also spending €40 million this year on marketing Magners in Britain.

Despite this, its share of the cider-over-ice market in Britain has slipped from 100 per cent last year to 76 per cent in July as a result of "heavy price-led competition", it confirmed in its interim results statement yesterday.

Mr Pratt said C&C would not jeopardise its position at the premium end of the market by aggressively competing on price. He said the company would "sharpen its competitive capability", particularly in the managed trade sector, or the large British pub chains with which it lost exclusive supply deals as Scottish & Newcastle fought to claim a stake in the market.

Mr Pratt would not give any further details yesterday on the extent of the company's cost- reduction programme, saying a proper consultation programme had to take place first. But he said the internal review of potential areas for cost-cutting would be "right across the board".

The group announced 70 job cuts at its manufacturing plant in Clonmel in August, days after it issued its second profit warning in three weeks.

C&C's plans to introduce Magners to less weather-sensitive markets following pilot testing in Munich and Barcelona will now be "a slow burner", he said. It will instead focus on recapturing its early sales growth in Britain.

Since selling its snack foods and soft-drinks division, cider has been the main focus of C&C's business, although it retains its spirits and liqueurs division. Tullamore Dew whiskey remains the star performer in this division, with volume growing by 22 per cent in the first half.

The interim dividend was unchanged, at 12 cent per share, while net debt was reduced by 31 per cent to €212 million.

C&C shares fell 11.7 per cent to €5.32 following the results.