Tesco sees profit rise but warns on future costs

Tesco, the UK’s largest supermarket chain announced on Tuesday that its profits grew by 18.7 percent in the first half of the year.

At the same time, however, it warned that while it had budgeted for rising oil prices, the actual rise in costs might be as much as £60 million ($108 million) higher than what had been budgeted for.

That might well be more than the company could absorb by cost cutting in other areas, according to Tesco’s chief executive, Sir Terry Leahy.

Still, the company says that it will attempt to avoid passing higher costs due to rising oil prices on to consumers through such measures as energy conservation.

Tesco reported that first half sales were up 14.1 percent to £18.8 billion. Operating profit grew by 19.9 percent to £964 million, and international profits added 23.5 percent to £163 million.

Earnings per share were reported to be 8.22p per share in the half, compared with 7.07p per share in the previous reporting period.

Tesco’s board has proposed paying an interim dividend of 2.53p per share, compared to its last dividend of 2.29p.

Tesco’s shares were down 2.3 percent to 319p early in the day on Tuesday in London, and had fallen a total of 4 percent by the end of the day’s trading session.

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