Icelandic food company Bakkavör has seen its profits slide in the first half of the year despite sales gains.

Operating profit dropped 36% during the six month reporting period, falling to GBP36.4m (US$72.1m) while EBITDA fell to GBP58.5m, down 23%.

The company posted modest sales gains, which increased 11% in the half rising to GBP803m. However, these were more than offset by an increase in raw materials costs, the strength of the euro against the pound, the downturn in consumer confidence and costs associated with the group's restructuring programme.

Bakkavör said that profitability also felt the negative impact of its investment in Ireland-based food maker Greencore Group.

"In Q1 we announced that we had taken an economic interest in Greencore Group. In the period, Greencore Group's share price fell sharply which affected our profits significantly, CEO Ágúst Gudmundsson said.

However, Gudmundsson added: "We remain confident in this strategic holding, which reflects our commitment to the fresh prepared foods sector. We believe Greencore Group is well-placed to build on its strong market position and deliver long-term value for its shareholders."

Bakkavör made a number of international acquisitions during the period and the company said that this allowed it to improve its position in a number of key markets, including the US and China.

Looking forward, Gudmundsson said that the trading environment is expected to remain tough.

"We will continue to focus on driving market share growth, recovering inflationary costs, improving operational efficiencies and restructuring parts of the business where necessary. This is expected to have a positive impact on sales and profit performance in 2009," he said.