China Food Company has cut back on its expansion plans as it continues to work off a hangover left by last year's rise in commodity prices.

The animal feeds group said it was cutting marketing budgets, and delaying the opening of a factory making soya sauce for the consumer market, after a 1.8% fall to £5.2m in earnings last year. The company's cash pot shrank by 40% to £4.41m.

"In the current challenging conditions, we have adopted a more cautious financial plan," John Mclean, the China Food chairman, said.

"We will defer the [factory] completion until... the receipt of a bank facility which will provide additional funds," John Mclean, the China Food chairman, said.

'Continued challenges'

The earnings drop, despite a 27% growth in sales in renminbi  terms, reflected continuing difficulties in reviving sales margins for animal feed which, after being hurt last year by rising raw material prices, are being depressed by the woes of China's livestock farmers.

"The customer base cannot absorb the price increases," Mr McLean said.

"The feed business... will continue to face challenges in the short term as the livestock industry is hit by reduced export demand and from increased competition."

However, the group said it was "confident" in its overall prospects, with the soya sauce market set to benefit from the "inevitable growing affluence of the Chinese population".

China Food Company shares closed unchanged at 32.5p on London's junior AIM market.