UK baker and confectioner Lees Foods saw its shares slide today (6 January) despite posting a rise in annual sales.

In a trading update, Lees recorded a 2.5% increase in sales for 2010, rising to GBP18.7m (US$29m). The company said pre-tax profits would be "in line with current market expectations".

Chief executive Clive Miquel said Lees had put in "an excellent performance" in 2010 and said sales rose across "most product categories". Miquel said that growth was "very satisfying" given the poor weather in December.

However, the Lees boss issued a warning about commodity costs. "Towards the end of the year we were hit by unprecedented commodity and packaging cost increases. As an example, the price of coconut, an important ingredient for Lees, has more than doubled over recent months," Miquel said.

"It is too soon to estimate the net impact on the business for this year, as we are working very hard to mitigate these increases both through improved efficiencies and by passing a proportion of these costs onto our customers."

Shares in Lees were down 3.2% at 215p at 10:08 GMT this morning.