Tesco said its turnaround efforts were paying off with improved trading in the UK.
But the supermarket chain revealed the impact of tough overseas markets and the costs of its overhaul as group profits slumped by a quarter.
It posted first half group pre-tax profits of £1.39 billion sterling, down 24.5% year-on-year with currency effects stripped out after being hit by restructuring costs and steep profit falls across Europe and Asia.
On its operations in Ireland, Tesco said that as the economy slipped back, albeit temporarily, into recession, consumers have faced further pressures on household finances.
It said that as a result, the discounters - like Aldi and Lidl - have fared better than the other supermarket chains here.
''We have plans to address this in the second half. Despite the challenging conditions, Ireland, like Hungary, remains a high-returning business,'' the company added.
Tesco reported improving trading profits in its UK business, with profits up 1.5% to £1.13 billion. Like-for-like UK sales excluding petrol remaining flat in its second quarter after falling 1% in the previous three months.
But it suffered a 71% tumble in European trading profits to £55m in the first half to August 24 and admitted the hit was worse than expected after conditions worsened in countries such as Turkey and Poland as well as Ireland.
Profits also fell sharply across Asia, down 12.4% to £314m, excluding China.
Tesco chief executive Phil Clarke said he remained committed to Europe, but stressed the region accounted for less than 15% of group sales.
Mr Clarke is under pressure from investors to show traction in the turnaround of the UK business after spending £1 billion last year in a bid to stem market share declines.
Outside of the UK, he has sold off businesses including Fresh & Easy in the US. Tesco said today that it would also pay $558m to fold its Chinese hypermarkets into a joint venture with China Resources Enterprise Ltd.
"Despite continuing challenges, we have made further progress on our strategic priorities," Clarke said in today's results statement.
The company said it expects to show an "improved trading performance" in the second half of the year. It repeated its goal of mid-single digit trading profit growth in the medium-term.
Tesco Ireland said that its online sales have continued to grow, adding that nearly 40,000 customers have downloaded its new price news app. The Tesco Mobile business also saw continued market share growth and recently broke the 200,000 customer mark.