In the first six months of 1992 profits from United's US subsidiary, Keebler, were barely a third of the level attained in 1991.
Keebler contributed pounds 12.1m to trading profits in the half-year to 11 July, compared with pounds 29.7m last time. Overall pre-tax profits were pounds 70m, compared with pounds 84m. Earnings per share dropped to 9.6p from 11.6p.
The weakness in the US, coupled with the continued struggle to maintain sales in the UK and continental Europe, has led some City analysts to believe United Biscuits could soon face a takeover bid.
Through ownership of McVitie's, KP, Terry's and Ross Young, the company makes Digestive biscuits, peanuts, All Gold chocolates and frozen pizzas.
The company's shares fell to a five-year low when the worse- than-expected results were published yesterday morning.
They started the day at 235p, dropped to 222p, but rallied strongly later in the day to close up 24p at 259p.
The stock market took heart from United's firm commitment to maintaining the annual dividend. The half-year payment was held at 5.5p. Robert Clarke, chairman, said: 'It never occurred to us to cut the dividend.'
If the company stands by its promise, the shares will yield 7.8 per cent, on yesterday's closing price.
United shares collapsed over the summer as suspicions grew about the state of the US operation. In April the shares were trading at a five-year high of 435p.
The company has had four problems with Keebler. First, stiff competition - primarily from US food company Nabisco - meant United had to keep price rises below the rate of inflation. The competition also meant sales volumes suffered. United was also obliged to hit back with increased marketing and promotional expenditure.
Compounding the difficulties, the depressed state of the US economy meant consumers bought cheaper goods. Keebler's highly profitable top-of-the-range lines sold badly. The combined effect was to slash Keebler's trading profit margin from 5.6 to 2.4 per cent. Nabisco's equivalent profit margin is about 12 per cent.
Mr Clarke said: 'Keebler's disappointing performance reflected extremely unfavourable market conditions.'
United has already embarked on a programme to shore up Keebler. It is increasing marketing expenditure to defend its market position and is introducing new products. It addition it is closing its Van Nuys bakery in California and cutting jobs.
The company said the cost of the restructuring will appear as an exceptional item totalling pounds 10m in the year-end accounts.
The seriousness of the problems at Keebler and the exceptional costs led analysts to cut their already reduced full-year forecasts. Carl Short at Nomura thinks the company will turn in a profit of pounds 170.5m, down from pounds 186m previously.
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