Waterford Wedgwood will close two of its manufacturing operations in Britain with the loss of 1,058 jobs as poor demand for its luxury goods continues to be compounded by the weak dollar. Siobhán Creaton, Finance Correspondent, reports

Some 1,600 staff at its crystal manufacturing base in Waterford have been put on short-time working this week and the company will continue to monitor the impact of the dollar and poor sales on its business.

Announcing pre-tax profits of €7.2 million yesterday, Waterford Wedgwood's group chief executive, Mr Redmond O'Donoghue, said the group was transferring the Johnson Brothers earthenware business from England to Asia, where it hopes to save 70 per cent on production costs. The two factories are based at Stock-on-Trent.

Some earthenware manufacturing of Wedgwood-branded goods will be transferred to its operations at nearby Barlaston. Mr O'Donoghue said this would safeguard 275 jobs in Britain.

The Waterford-based crystal manufacturing operations produce 65 per cent of the group's cut-glass products for sale in the US market. Sales of the brand have remained weak in the US where most luxury goods have been heavily discounted, in some cases by more than 50 per cent. The weakening dollar has added to its difficulties, depressing the profitability of this business further.

Mr O'Donoghue said staff in Waterford had a tradition of taking short-time working in response to sluggish sales. "We have a very fine factory in Waterford following substantial investment over the years. Waterford is as safe as any part of our business," he said.

When asked whether the company would consider transferring further manufacturing to lower cost regions such as Asia, Mr O'Donoghue said it wouldn't want to not have any manufacturing of Waterford Crystal or Wedgwood. "We have invested substantially in Waterford and have great craft skills which produces efficiencies in this factory. China is a large threat to all world industries because its cost base is so incredibly low but we have huge fixed costs here. We can't turn the key and walk away," he said.

Waterford Wedgwood shares took a tumble on foot of the worse-than-expected news from the company but later recovered to close unchanged at 23 cent. Analysts were yesterday preparing to substantially reduce their profit forecasts for the group for this year.

Operating profits rose by 14 per cent to €64.2 million while sales were down by 4.6 per cent to €951.3 million.

Investors will be disappointed at the company's decision to cut its dividend given its long tradition of delivering substantial yields to stock holders. The board has proposed a final dividend of 1.2 cents per share, bringing the total dividend for the year to 1.9 cents per share. This compares with a final dividend of 2.4 cent and a total dividend of 3.1 cent in 2002.

There are also concerns about the company's debts. Yesterday it announced that it had brought forward the re-negotiation of credit facilities provided by 12 banks, including Bank of Ireland and Royal Bank of Scotland.

As some of its debts are in dollars, the slide in the value of the US currency contributed towards the €33.5 million reduction in debt to €356.7 million. Waterford refuted suggestions that the banks had wielded influence in relation to the decision to cut the dividend payment to shareholders.