The UK’s second biggest egg producer and packer Stonegate has reported a fall in pre-tax profits of more than £4m.

The company’s annual results for the year ending 1 October 2011, which was lodged with Companies House, reveal a massive slump in pre-tax profits, which fell from £4.1m in 2010 to £72,000 last year.

Overall turnover also dropped by about 11% from £137m to £123m in the same period.

The directors’ report blamed an oversupplied market and high costs for raw materials for the losses incurred, as well as huge investment into enriched colonies in the run up to the conventional cage ban.

“In a highly competitive marketplace with uncertainties regarding how the changes in legislation will affect the marketplace, the implications are of a challenging year ahead,” said the directors’ report.

It said a future challenge was the ability to meet the demands of retailers by having the correct supply and type of egg.

Last week, it was revealed that Stonegate’s subsidiary company, STC Packers Cornwall, would be closing due to financial difficulty and consequently 40 jobs could be lost.

However, the directors said they were confident the group had the right strategy to grow the business.

“The group is very aware of current trends to move to free-range and organic eggs and continues to actively manage the supply from this area.

“It has continued to invest in its brands and has continued its pursuit of improving efficiencies, reducing costs and utilising resources more efficiently.”