Northern Foods profits up

LONDON (Reuters) - Northern Foods reported a 25.3 percent rise in full-year earnings on Tuesday, at the upper end of market expectations, as it cut costs and negotiated price increases with retailers.

Shares in the maker of Goodfella's pizza and Fox's biscuits rose 2.6 percent to 88.25 pence by 9:40 a.m..

Northern Foods, which also supplies own-label prepared foods to supermarkets, said pretax profit from continuing operations was 50.1 million pounds, compared with 40 million the year before.

Revenue rose to 931.9 million pounds from 888.5 million.

A Reuters poll of 10 analysts forecast average pretax profit of 48.7 million pounds, with a range of 46.9 million to 50.8 million pounds.

Northern Foods said it had passed on "significant" commodity cost increases, especially in cereals, dairy, cocoa, and fats.

Finance Director Jez Maiden told reporters that last year prices were raised by an average of 2.8 percent. This year, he anticipates prices will rise by between 2 to 2.5 percent.

Operating margin was up 10 basis points on the previous year at 5.2 percent despite the higher commodity costs, driven by a 130 basis point increase in the chilled division and 90 basis point improvement in bakery.

However, Northern Foods warned the current trading environment remained challenging.