French food group Fleury Michon posted a decline in first-half earnings amid rising raw material costs and intensifying market competition.

The maker of charcuterie, surimi and prepared meals booked consolidated net income of EUR1.7m (US$2m), down sharply from EUR8.9m, the company said in a statement. The net profit margin deteriorated to 0.5% from 2.4%.

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Fleury Michon reported a first-half operating loss of EUR1.2m from a positive EUR13.3m in the corresponding period of 2016, which the company said was bigger than previously forecast due to a higher-than-expected rise in raw materials prices at its French supermarkets division. The EUR5m increase mainly hit pork hams and was not passed on to retailers during the half.

Excluding one-off items, Fleury Michon booked a first-half operating profit of EUR3.7m.

The group warned in July when reporting its first-half sales figures its earnings and operating results would come under pressure as input costs increased.

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The company reported then that sales to French supermarkets, the bulk of Fleury Michon’s business, dropped 3.8% to EUR302.9m. Sales of products sold under its namesake brands dipped 2.5% to EUR290m. The international division reported a 3.9% fall in revenue to EUR26.8m and the catering segment posted a 3.1% rise to EUR30.1m.

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