Greencore, the convenience food group that is withdrawing from the sugar industry, said a higher-than-anticipated tax charge will partly erode earnings this year. The company's shares slumped 4.1 per cent.

The combined performance of Greencore's two operating divisions will beat analysts' estimates for the year ending September 29th. However, the company will incur a higher tax charge because it earned more of its profits than previously expected in Britain. As a whole, Greencore's forecasts for the financial year are in line with its previous outlook.

Greencore's convenience foods division will likely see operating profit rise at least 5 per cent to match the market consensus of €68.6 million, the company said. The division makes pastries, chilled meals and other foods for supermarket chains in Europe and is also the world's largest maker of sandwiches.

"This performance will be delivered despite significant cost pressures, the most noteworthy of which is energy inflation costs of more than €5 million," Greencore said in a statement yesterday.

Second-half trading at the division will compensate for the lower profit growth recorded in the first six months of the financial year. To date, revenue has risen more than 7 per cent in the second half, while operating margins are "broadly" in line with those from the previous year.

Greencore's ingredients, agribusiness and related property division will probably deliver profits above analysts' average estimate of €25.2 million, the organisation said. Since the company announced its decision on March 15th to exit sugar processing, its sugar business has performed better than Greencore expected.

"This stronger-than-anticipated profit performance in sugar has compensated for a continued weakness in EU malt markets, a weakness compounded, in the case of Greencore Malt, by nearly €4 million worth of energy-price increases," the company said.

The company decided this summer to challenge the Government's decision on how it should allocate €145.5 million in restructuring aid it will receive because of the rationalisation of the European sugar industry and the company's departure from Irish sugar production.