The company, which manufactures foam for industrial and commercial use, said that an expected fall in demand for three-dimensional jigsaws would be one of the key reason for the fall in profits.
Sales to jigsaw manufacturers, who use the foam to stuff their 3D creations, account for around 18 per cent of the company turnover.
Earnings and sales would also be hit by lower-price imports from Continental Europe and by a flat demand UK market, where most of its customers have been suffering from the pound's rise, Zotefoams said. The combined effects of these factors would "adversely impact profits in the second half."
City analysts scaled down their forecasts for the full-year results and are now predicting profits of pounds 7m, compared with around pounds 8.3m previously.
The warning caused a plunge in the shares, which lost 28 per cent of their value to close at 152.5p, wiping around pounds 18m from the company's market value.
Zotefoams, which was spun off from BP in 1992, reported a 9 per cent fall in first-half pretax profits to pounds 3.7m on turnover up 2 per cent to pounds 12.3m. The company said the strength of sterling had reduced the interim profit figure by pounds 400,000.Reuse content