Confectionery and cake manufacturer Lees Foods warned this week that soaring raw material costs, coupled with mounting competition from European suppliers, were likely to dent this year's profit.
Unveiling a strong set of figures for 2007, the group, which operates Lees of Scotland, Waverley Bakery and Patisserie UK, reported a 7% increase in pre-tax profit to £720,700 on sales up 5% to £15.1m for the year to 31 December.
However, chairman and chief executive Raymond Miquel said the 2008 figures were "likely to be down on last year's".
He added that he was "disappointed" that "very competitive pricing" from suppliers in Europe targeting UK supermarkets meant the business was not able to pass on labour, power and distribution cost increases to its customers among the major multiples.
The company faced "ongoing pressures in the marketplace to recover these costs", which included increases in the minimum wage, he said.
Meringues, which the Coatbridge-based company has produced for more than 20 years, were among the products affected by European competition.
Sales of meringues and ice cream cones had also been hit by Easter taking place earlier than normal and poor weather, said Miquel.
However, he stressed, the company would "continue to work on new product development and to pursue our policy of funding suitable acquisition opportunities".
Lees Foods would seek acquisitions that enabled further diversification, he added.
The purchase of Patisserie UK last December had also given it a route into foodservice, supplying coffee shops, restaurants and the hotel trade with high-quality bakery products, he said.