Kesko saw operating profit in its food business grow over the first half of 2011, with the Finnish grocery retailer reporting “excellent” sales of its Pirkka private-label range.

The company said today (26 July) that, for the half ended 30 June, operating profit in its food division was up 13.5% to reach EUR87.2m (US$126.3m).

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Over the period, sales in the food division rose 7.2% to reach EUR2bn. Sales in its K-food banner increased by 6% and Pirkka sales jumped 38.9%

Kesko said that it estimates Finland’s grocery market grew 5.5% over the previous year. Food inflation stands at 4.5%, it said.

Over the second quarter, operating profit from Kesko’s food division was up 3.8% to EUR45.8m, while sales rose 10.3% to reach EUR1.1bn.

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Consolidated operating profit for the company, excluding non-recurring items, which includes DIY, cars and machinery was up 19.4% to reach EUR118.3m for the first half. Net profit rose 20.3% to EUR83m, while sales rose 8% to reach EUR4.6bn.

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For the second quarter, Kesko’s consoldiated net income was up 7.6% to EUR58m, . Operating profit increased 6.6% to EUR83.3m. Sales rose 8.5% to EUR2.5bn

Looking ahead, Kesko said it expects consumer demand to be steady due to “high consumer confidence and continuously low interest rate levels”.

However, it said that uncertainties around economic development are mounting with “tightening taxation, accelerating inflation and the ramifications of possible disturbances in the financial market”. These factors, combined with cuts in public finances, may have a negative impact on consumer demand, the retailer said.

Shares in the company were down 2.89% to EUR28.8 a share at 11:46 EEST today.