British Vita, the maker of foam and plastic sheeting, yesterday warned that an accounting error in one of its divisions would hit the group's overall profitability for 2003.
Shares in the company fell 5.5 per cent to close at 255p after it warned that pre-tax profits for the year would now be at the lower end of market expectations, which range from £62m to £67m.
The accounting problem was uncovered in its US Nonwovens division, which makes yarns and waddings that are found in products ranging from disposable nappies to underwear and insulated jackets.
British Vita said the division had not only had a tough year of trading but that profits would also be hit because some operating costs had been misclassified in the accounts as assets.
That meant that profits at the division were overstated by about £5m over an 18-month period spanning 2002 and the first half of 2003.
The error was uncovered about two weeks ago in an internal review as the company was preparing its accounts for 2003. One person in the finance department of the division has left as a result of the finding.
While British Vita insisted it was a one-off incident, it said it had reinforced internal procedures to prevent it happening again. It is now focussing on improving that division's performance to return it to profitability.
British Vita also said its cellular polymers and its industrial polymers divisions had performed well and it was planning to sell its 18 per cent stake in the US plastics company Spartech. Analysts estimate it could raise £77m.