IRN-Bru manufacturer AG Barr would say only that merger talks with Britvic were "ongoing" as it announced its first-half profits had fallen 8%, even though its sales growth beat the overall soft drinks market.

AG Barr, based at Cumbernauld, near Glasgow, declined yesterday to elaborate on any aspect of its talks with Britvic, ahead of an October 3 deadline for a further announcement under the City Code on Takeovers and Mergers.

Roger White, chief executive of AG Barr, declined to be drawn on analyst comments that the headquarters of a combined entity could be at his company's North Lanarkshire base.

When they announced on September 5 that they were in talks about an all-share merger, Britvic and AG Barr revealed Mr White would become chief executive of the enlarged company if a deal were to go ahead.

The companies also said it had been agreed that Britvic shareholders would own 63%, and AG Barr investors 37%, of a merged entity, and disclosed the talks had resulted from an approach by the Scottish company to its Hertfordshire-based sector stablemate

AG Barr said yesterday it had made underlying pre-tax profits of £14.9 million in the six months to July 28. This was down from £16.2m in the first half of its prior financial year, even though it enjoyed a market-beating jump in sales amid poor weather and in a grim economic climate.

The company cited an "adverse currency movement" of £1m in these first-half figures. It added first-half profit was therefore down only £300,000 on a "constant currency" basis.

Mr White explained that this adverse impact related mainly to the accounting requirement to mark the foreign currency which AG Barr held to purchase goods, mainly the euros used to buy sugar and some carton packaging, to the prevailing market exchange rate.

The downward impact on profits of this "mark to market" exercise had, he noted, been caused by sterling's appreciation against the euro.

He highlighted AG Barr's expectation about £600,000 of this adverse currency impact would be unwound in the second half, as the euros held were used to buy sugar and other materials.

The City seemed happy with the interim results, which included news of a 7.5% rise in the half-year dividend to 2.616p-a-share, and marked shares in AG Barr up 8.9p or 2% to 459.9p, giving the company a stock market worth of £537m.

The signs yesterday were that the City was sticking with a consensus forecast of about £34m for AG Barr's pre-tax profits for the full year to January 2013. If achieved, this would represent a slight increase on the underlying figure of £33.6m for the year to January 2012. Stockbrokers had trimmed their forecasts for full-year profits after a trading update from AG Barr in late July.

AG Barr, which also makes Rubicon exotic fruit juice drinks, the Barr-branded range of carbonates, and energy drink Rockstar, said its first-half turnover rose by 4.9% to £130m. Its volume of sales in the six months to July 28 was up 2.8% on the same period of last year.

The company said the UK "take-home" market for soft drinks had seen a 1.5% fall in volumes, and rose only 2.2% in revenue terms over the corresponding time periods.

AG Barr, which has started building a factory at Milton Keynes in the Midlands which is due to open next summer, noted first-half profit margins had been hit by higher costs of raw materials, particularly sugar, and "adverse product, channel, and pack mix".

Mr White said poor summer weather meant people had been less likely to buy a soft drink to have with a sandwich outside at lunchtime. They had, however, continued to buy bigger bottles or packs of soft drinks in larger retailers such as supermarkets, to drink at home.

Profit margins, he noted, had been hit by this change in sales mix, by greater promotional activity in the likes of supermarkets, and by strong growth with Rockstar. He pointed out AG Barr's profit margins on Rockstar were lower than on other products because this drink was made under a franchise arrangement.

Asked about employee morale, against the backdrop of the Britvic talks, Mr White replied: "We have been through, as a business, lots of changes, consolidations, and acquisitions, and restructurings of the business in the last few years, and people are very positive and realistic about the business's desire to improve and grow. They are getting on with doing their jobs."