Bermuda Bakery Ltd. on Friday reported a decline in net income of 17.9 percent to $454,395 for the year ending December 31, 2002. That compares to $553,678 in 2001.

Chairman and president James A. Pearman attributed the decrease to a downturn in sales of bakery products.

Earnings per share all dropped to $1.59 compared to $1.94 in the year-ago period. Shareholders' equity per share increased to $22.18 in 2002 compared to $21.58 in 2001. An increase in net assets reflected the modernisation of the Belvedere building electrical system and installation of bakery process equipment and facilities.

Mr. Pearman said the bakery division continues to face stiff competition from a growing number of small bread-making operations. "At the same time a weak tourism and hospitality market has resulted in relatively flat sales of bread and roll products,'' Mr. Pearman said. "Management is tackling these significant challenges to the bakery's traditional market share with new products, marketing initiatives and improving operational efficiencies.''

The company also said that all capital expenditures and expenses were funded from current earnings and the bakery continues to operate without debt. Dividends paid last year amounted to $276,681, or 97 cents per share. Trading of Bermuda Bakery shares on the Bermuda Stock Exchange was modest and in the range of $23.50 to $35.

Meanwhile, the Belvedere office building continues at full occupancy with long-term tenants. Construction is underway on the complete replacement and upgrading of the air conditioning system to improve comfort control and the environmental quality of the building.

Revenues for the year were $5,562,583 compared to $5,726,786 in the year-ago period.

"As we begin our 80th year of operation, the challenge is to retain those strengths and characteristics which have sustained us over the years while changing to meet the needs of our clients and the community we service,'' Mr. Pearman said.