Food manufacturer Northern Foods today warned that profits will fall again this year, and said it does not see input costs falling despite widespread fears of deflation.

The company added that it expects analysts to trim their profits forecasts for 2009-10 by around 5%, but the shares rose 3⁄4p to 611⁄2p after it reported a better-than-feared 5.4% fall in profits for the year to the end of March.

Profits came in at £47.4 million, against £50.1 million the year before, while sales were up 4.6% to £975.2 million.

"The 2009-10 consensus for pre-tax profit is around £46 million and we're looking at that coming down a couple of million pounds," finance director Andy Booker said.

The company, which supplies branded and private-label food to retailers as diverse as Marks & Spencer and Poundland, saw material costs rise around 12% during the year, and does not expect this to fall in the current year.

"Commodity prices are fluctuating. Dairy is going down but protein is on the up, while the price of cocoa powder has doubled in the last year," chief executive Stefan Barden said.

"The key driver of that is weaker sterling. We do not see deflation this year."