British Vita Plc expects this year's headline earnings to be slightly below 2003 levels, the furniture foam maker said yesterday, citing bigger-than-expected hikes in raw material prices.

British Vita shares had fallen 3.2 per cent to 258 pence by 0848 GMT, after the company said it saw headline pretax profits "slightly below" last year's £50.7 million, excluding associates.

The chemicals company, which makes latex and polystyrene as well as foam for stuffing furniture, noted it had warned about rising raw material prices at the interim stage but these had been tougher than first thought.

"Raw material price pressures in the second half have proved more severe than expected, while supply of some resins has tightened. Overall volume growth has slowed somewhat from the five per cent achieved in the first half," it said in a statement.

The company said it anticipated a progressive improvement in margins as selling prices rise and raw material conditions ease. The process would be helped by accelerated cost cutting.

Analyst Zac Phillips from stockbrokers Teather and Greenwood said he was revising down his pretax profit forecast for both 2004 and 2005 by 12 per cent to £50.2 million and 57 million respectively following the announcement.

Excluding contributions from associates, which fell after the sale of shares in US-based Spartech Corp in January, Phillips forecast pretax earnings of £48.5 million to £49 million, but maintained his upbeat view of the firm.

"I believe that British Vita is in pretty good shape and to that extent the dividend looks pretty safe," he said.

British Vita also announced yesterday that it had bought the polyurethane business of US firm Synair Inc., including its Preston, England-based subsidiary Chemical Innovations Ltd., for £28.3 million.