Northern Foods’ bakery division showed "encouraging signs of recovery", with fourth quarter underlying revenue up 1.1%, according to the company’s latest trading update.

The firm, which owns brands such as Fox’s cookies and Holland’s Pies, said improvements in the bakery operation were part of an ongoing elimination of low-value products, marginally profitable promotions and the termination of unprofitable private- label contracts. A spokeswoman did not disclose which products were being axed, but indicated that certain biscuit lines were under scrutiny.

Overall, Northern Foods’ trading performance continued to meet the company’s expectations, with underlying revenue up 3.2%, prices up 2.4% and volumes increasing by 0.8%. The chilled food division also grew strongly: underlying revenue rose by 5.5% and volumes were up 3.4%, with sandwich and salad volumes "well ahead".

The adverse impact of a strengthening euro was reflected in the company’s frozen division which it said had cut profits in its Irish businesses by more than £1.5 million. Chief executive Stefan Barden said: "We are operating in a volatile trading environment with inflationary commodity prices. But we are confident we will continue to make steady progress in realising the business’ full potential."