The loss of a nutrition bar manufacturing contract has led US food group Ralcorp Holdings to decide to close a production facility.

The company said it was unable to secure a new contract for its Bloomfield business that would have given it an "acceptable margin".

Ralcorp revealed the unnamed customer accounted for 4% of its annual sales in its last financial year.

Ralcorp said: "As a result, we are re-scaling our Bloomfield business by bringing in several new customers and closing a production facility at the end of February."

It insisted work to bring in new customers and growth elsewhere in its cereal business would mean profits from the division would be level with last year despite the loss of the contract.

The news of the facility closure came as Ralcorp reported a drop in quarterly profits. Hedging losses and charges linked to acquisitions and the spin-off of cereal business Post hit profits in the first quarter of the quarter of the company's new financial year.

Ralcorp said yesterday (7 February) that its net earnings fell 8.4% in the three months to the end of December to US$65.3m.

Operating profit was down 7.7% to $135.7m; profits from Post, which was part of Ralcorp during the reported period but has now been spun off, fell 30% due to lower sales, more investment in marketing and higher input costs.

The company's other divisions reported higher operating profit except its pasta business, which saw an increase in durum wheat prices hit earnings.

Ralcorp's net sales increased 18% to $1.38bn on the back of its acquisition of Sara Lee's North American refrigerated dough unit last year and higher volumes from the company's snacks, sauces and spreads division.

The company's diluted earnings per share fell 9% to $1.16, although its adjusted earnings per share were up 5% at $1.33, just below Wall Street consensus of $1.34.

Looking ahead, Ralcorp said it expects its cost of goods sold to increase by 10-12% during the year due to increased durum wheat and nut prices. The company said it would "aggressively" reduce costs and look to increase prices to try to offset the higher costs.