Competition within the supermarket channel and compressed margins has seen Patties Foods, owner of popular food brands such as Four'n Twenty, Herbert Adams, Nanna's and Creative Gourmet, post a 16.5 per cent fall in profit for the first half.

The company has also sliced its interim dividend by nearly 16 per cent as it looks to post flat profits for the full year.

Patties Foods reported this morning that its interim half-year profit fell to $9.1 million from $10.8 million, as revenue rose 5.1 per cent to $125.5 million.

The earnings downturn was foreshadowed at the company's annual general meeting in November. Patties Foods said this morning it would continue to invest in its strategic growth initiatives, particularly the development of new channels and regions, and keeping a tight rein on costs. The company said that based on current trading conditions it expected net profit in the second half to be at or above the profit for the previous corresponding period.

During the first half margins were affected by higher competitor activity and margin pressure in the 'in home' supermarket channel, and manufacturing performance for Patties Foods was down due to the disruption caused by the installation and commissioning of a new robotic packing equipment.

Pressure on margins was mainly in the frozen fruit category with increased private label offers. The company's Nanna's Fruit Pie brand faced increased discounting in the category.

Managing director Greg Bourke said continuing revenue from the "out of home" channel [convenience stores, petrol stations etc] did not offset the pressure from the "in home" supermarket channel.

"In home revenue was flat and margins reduced during the period, mainly in the frozen fruit and fruit pie categories."

He said good revenue and margin growth were achieved from the "out of home" channels, with strong branded sales in the company's petrol and convenience channel as well as better corporate business sales.

Mr Bourke said new growth opportunities would come from potential new export markets in Britain, Asia and the US, a new range of Nanna's desserts and sales of savoury products into new out-of-home channels.

Patties Foods announced a fully franked interim dividend of 3.2¢ per share, down from 3.8¢ per share, and payable on April 12.