The next two months will be crucial in determining how bathroom fittings group Qualceram Shires performs over the full year, according to chief executive John O'Loughlin.

After Qualceram yesterday revealed a 7.3 per cent decline in net profit in the six months to the end of June, Mr O'Loughlin said the Irish market remained very challenging.

He said the slowdown in the housing market had not led to a resurgence in the renovation sector as anticipated and, even though consumer sentiment remained strong, the market was still tough.

"We will be keeping a close eye on September and October," he said, adding that so far this year he had seen no real change in the market. He also said pricing pressure remained strong, but he believed things may now have bottomed out.

Qualceram reported net profit of €1.6 million in the first half, down from €1.8 million in the same period last year. Turnover slipped 3.8 per cent to €50 million.

In Ireland, turnover was down 11 per cent to €20.8 million, while in Britain it increased marginally to €59.9 million. Turnover in export markets was up 18 per cent at €3.3 million.

Operating expenses fell 4 per cent to €13.7 million and Mr O'Loughlin said he had identified further cost-cutting opportunities.

Qualceram last week announced the sale of its 13-acre headquarters site in Arklow, Co Wicklow, to a property fund for €31 million. Mr O'Loughlin said yesterday the company was in advanced talks to purchase a new property, although declined to give any details, except to say it would be bought using existing cash. As of the end of June, debt stood at €20.9 million.

Qualceram will remain at the current site for the next 2 1/2 years.