Northern Foods has said its full-year profits will beat market expectations as sales growth and price increases more than recouped higher ingredients costs in its fourth quarter.

In a trading statement released this morning (27 March), the UK maker of Goodfella's pizzas and Fox's biscuits revealed that sales growth quickened in the fourth quarter. Sales for the quarter, excluding acquisitions and currency movements, ended 29 March increased 3.9%. Annual sales increased 3.2%.

"Fourth-quarter underlying revenue increased by 3.9% over the corresponding prior year quarter on flat volumes. The group continued to fully recover commodity cost increases, as it has done throughout the year," Northern Foods said.

Based on a range of analysts' forecasts, Northern Foods said that the market consensus for its pre-tax profit before restructuring costs ranged between GBP45m (US$95.3m) and GBP52.3m, with a median of GBP47.5m. "Group profit before tax will be ahead of median market consensus," the company said.

Sales of frozen products rose 2.8% in the quarter. In order to recover increasing commodity expenses the group pushed prices up 5.1%. However, volumes declined "only modestly".

The Leeds-based firm, which also manufactures Marks & Spencer sandwiches and ready meals, said its chilled business continued to show strong growth with fourth-quarter underlying revenue up 5.5% and volumes increasing 3.4%.

Northern Foods said its struggling bakery division "showed encouraging signs of recovery". The group said it has eliminated production of low-value baked goods and terminated unprofitable private-label contracts in order to boost profits. Revenue increased 1.1% during the quarter, Northern Foods revealed.

Looking to the future, CEO Stefan Barden said that, while market conditions look set to get tougher, he remains confident that Northern will continue to improve its trading performance.

"We are operating in a volatile trading environment with inflationary commodity prices. However, we are confident that we will continue to make steady progress in realising the full potential of the business," Barden said.

Results for the year ending 29 March will be released on 27 May.