DALEPAK owner Northern Foods warned last night that profits would fall below last year's after high energy costs and competition hit margins.

The Leeds company, which employs 300 people at the Dalepak factory in Leeming Bar, near Northallerton, North Yorkshire, said third-quarter sales rose three per cent, but that sharply higher fuel bills and discounts in its biscuits division meant second-half margins would be lower.

In a trading update, Northern Foods said: "Accordingly, the group's profits before tax for the current year are expected to fall below the prior year."

Northern Foods, which also makes Fox's biscuits, posted pre-tax profits of £62.2m last year, but said this year it would be below that and less than City forecasts of between £63m and £70m.

Chief executive Pat O'Driscoll blamed the lower profits on delays in price increases needed to combat soaring energy bills, which leapt 20 per cent, or £2m, in the first half, and 60 per cent, or £6m, so far in the second half.

She said: "Delays in putting price increases through to deal with the increase in the cost of energy has hit margins and profits.

''We had some price increases in the third quarter, but we have more to do in the fourth quarter. It is taking longer than expected to complete this process.''

Despite the profits warning, Ms O'Driscoll said it had been a good Christmas for Northern Foods, with sales five per cent higher last month than the same period a year ago.