Shares in Aim-listed Real Good Food slumped today after the firm warned it would make a loss this year.
The company, which makes cake, bakery and decoration products, said its sales in the first half of the financial year had jumped 13 per cent on a like-for-like basis, but that rising commodity prices were hurting profitability, citing butter prices as a particular problem.
Real Good Food said it was also dealing with currency headwinds, and advisory costs associated with regulatory issues.
To reduce costs, the business will be moving its head office from London to Wavertree, Liverpool.
At time of writing, Real Good Food's share price was down 15 per cent to 22p.
In Real Good Food's cake decoration arm, revenue was up six per cent for the first six months of the year. Sales is its premium bakery and ingredients divisions were up 10 per cent and 28 per cent on a like-for-like basis.
The food company said in a trading statement this morning: "Although the premium bakery division has demonstrated revenue growth in the first half, margins are considerably below previous expectations, as a result of commodity price increases (especially butter) as well as labour inefficiencies and materials wastage during a period of extensive and disruptive site re-development and investment."