The group, best known for its bright orange Irn-Bru drink, said pre-tax profits fell eight per cent to £14.9m in the six months to 28 July despite a five per cent rise in sales to £130m.
It blamed higher sugar costs, increased brand investment and poor summer weather, where consumers became less inclined to buy impulsively from smaller outlets with higher margins, such as corner shops.
The group said competition in the soft drinks market has intensified over the past six months, due in part to the Olympics and the Queen’s Diamond Jubilee celebrations.
But it said the greatest impact on the market has been the surge in promotional activity by brands trying to increase volumes sales.
“Despite the immediate challenges of the market our core brands Irn-Bru, Rubicon and Barr are in good health and well positioned to continue to grow into the future,” the group said.
It also raised its interim dividend by 7.5 per cent in a show of confidence.
Chief executive Roger White said the merger talks with Britvic are ongoing but was unable to comment further due to Takeover Panel rules. A final decision is due on 3 October.
The deal is likely to see Britvic owning 63 per cent of the group and AG Barr just 37 per cent, which one analyst described as a “bum deal” for the latter. Others, however, argue that Britvic should be given a larger slice of the proposed company.