South Wharf records losses of €2.2m despite rising sales

South Wharf, the former Ardagh plc, slipped into the red last year despite recording a small increase in sales. The losses came as expenses climbed, due in part to the firm's controversial attempt to purchase the property it occupies at Ringsend in Dublin.

The firm claims it has the legal right to buy the site at a reduced price from Dublin Port, but the Port Company disputes this. South Wharf spent €1.4 million last year on a "property development investigation" into the site, with the money spent on consultation with architects, planning experts and other professionals.

The disagreement between South Wharf and Dublin Port is due to reach the Commercial Court in July, with the company yesterday promising to "vigorously defend" its position and pursue what it sees as its statutory right to buy the site.

Rough estimates value the property as highly as €300 million, largely because it features in Dublin City Council's plans to develop the wider area. South Wharf wants to buy it for roughly €750,000.

Turnover at South Wharf grew from €851,000 to €1.18 million last year, but an operating profit of €1.1 million was transformed into a loss of €2.2 million over the same period.

The results included a combined profit of €870,000 on the sale of property, plant and machinery, with the property in question outside the confines of the main Ringsend site.

South Wharf attributed the higher turnover to sales of glass manufactured at Ringsend, where production started again on a small scale last summer.

South Wharf also highlighted some success with its agency business, which sees the firm handling customer orders that are then fulfilled by Ardagh Glass in the UK. Ardagh Glass was spun off from South Wharf in 2003 and was last year taken over by Caona plc, a company controlled by some of Ardagh's largest shareholders, including Paul Coulson.

South Wharf said it might be possible to increase this agency business still further as Ardagh Glass raises its UK production capacity. The firm, which is facing a substantial competition threat in Britain from Seán Quinn's Quinn Glass, expanded through acquisition last year.

Moody's, a rating agency, yesterday reduced its ratings for Ardagh Glass because of concerns about the firm's "credit metrics and free cashflow generation".

The agency cited intensifying competition and volatility in raw material and energy costs in the downgrade.

Moody's also pointed to Ardagh's high debt levels and the limited scope it will have for deleveraging in the near-to-medium term.