The Waterford Wedgwood crystal and china group has warned that it will take action to protect its profitability if demand for its products weaken over the remainder of the year.

Waterford's chief executive, Mr Redmond O'Donoghue, said yesterday it was too early to say if jobs at the company's plants were in jeopardy, but indicated that it was more likely that reductions in inventories would come about by reducing the amount of product that it outsources from eastern Europe.

"We're not sure what's going to happen and we will need a few months to see, but we have to balance supply and demand. But inventories will not be allowed to increase." He would not comment directly on the likelihood of jobs cuts, but the inference drawn from his comments yesterday was that a reduced level of outsourcing is more likely than cutbacks at the Irish crystal plant.

Currently, Waterford outsources 40 per cent of its crystal from eastern Europe and the plants in Waterford have to compete against plants in Europe for any new products. But sources close to the company said the Irish plants are now far more competitive than they were in the past.

Mr O'Donoghue said Tuesday's terrorist atrocities in the United States had "cast a pall of gloom over everybody". But he added: "The American economy is very resilient and I can't see them allowing it to deteriorate. It's important that we don't lose the head and we need to remain calm and see how things go."

In line with other stocks exposed to the American economy and the likelihood of a severe downturn in American tourism, Waterford Wedgwood shares fell heavily yesterday and were as low as €0.80 before recovering in later trading, closing down nine cents on €0.85.

Waterford's half-year results were down on the previous year but were better than most market forecasts, with pre-tax profits down from €18.2 million to €17 million. Mr O'Donoghue said that given the difficult trading conditions, especially in the US, the results were positive.

Overall, sales were up 3.4 per cent to €462.3 million but within this total figure, crystal sales fell almost 9 per cent to €162 million, from the exceptional levels of 2000 when sales of millennium products hit their peak.

Ceramic sales were 13 per cent higher on €229.5 million, while sales of other products - mainly cookware - were 6 per cent higher, on €70.3 million.