Greencore Group has warned its full-year margins and profit could be hit by currency exchange rates and cost inflation.

The convenience foods manufacturer reported a 2.5% increase in operating profit to €41.1m (£32.6m) on sales also up 2.5% to €648.7m (£515.1m) for the six months to 28 March, but said currency translation had hit its first-half results and the impact would be more pronounced in the second-half.

“If the EUR/GBP level continues in the 0.78-0.80 range, the translation effect year-on-year would reduce group operating profit by circa €11m (£8.7m) and profit before tax by circa €8.5m (£6.7m) for the full financial year,” the group said.

First-half operating margin in its grocery business fell to 6.2% from 6.7% because of higher levels of inflation in areas such as glass, processed tomatoes and onions.

It estimated cost inflation would hit its convenience foods division by €57m for the full-year, with €22m in the first-half already.

Core sales in its convenience division rose 6.5% and sales in its ingredients and related property division rose 27%.

“These results represent very good progress in an environment characterised by substantial food inflation and a significant decline in the value of sterling relative to the euro,” said CEO Patrick Coveney. “On a constant currency basis, we delivered strong double digit growth in sales, profit and EPS.”

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