Qualceram Shires has passed on paying an interim dividend after reporting a 58 per cent drop in first-half pre-tax profits to €1.5 million. Turnover slipped back by nearly 10 per cent to €51.2 million in the six months to end-June, while group operating margins slid to 8.6 per cent from 11.7 per cent.

However, the bathroom manufacturer said it had made a significant recovery from the poor second-half of 2001 and it was confident that full-year sales would be in line with expectations. The market had pencilled in sales growth of around 10 per cent.

"We are confident that with a continued focus on costs, customer service and product availability, the trend in turnover levels will remain constant, which will keep the group in line with expectations for the full year," chief executive Mr John O'Loughlin said.

Qualceram shares were unchanged by the results, closing at €2.20 last night. But analysts said they planned to downgrade their forecasts in the wake of the results, which were below expectations. Merrion analyst Mr John Mattimoe cut Qualceram shares to "hold" from "buy" and chopped his full-year earnings per share forecast for the group to 22 cents from 31 cents.

The firm said market conditions remained challenging in the Republic but its brands were performing strongly. It has introduced a number of new bathroom suites in Britain where market conditions are "generally favourable" and which it hopes will boost turnover in the second half.

Qualceram is also continuing a cost-reduction programme although it noted that higher insurance and distribution costs had a negative impact in the first half.

The cost-cutting will see 68 people made redundant at its Stoke-on-Trent plant in England while 18 workers have been redeployed to other plants. Although net debt fell to €47 million, from €53 million at the end of last year, the company's interest bill was larger than expected at €2.5 million, analysts said.