James Cropper PLC on Wednesday said that, despite strong demand and double-digit annual sales growth, it will miss previous expectations for profit due to gas price increases and their affect on the profitability of the company’s Paper division.

Shares in the Cumbria-based paper products manufacturer were 18% lower at 1,002.00 pence on Wednesday in London. The stock is down 8.9% over the past 12 months.

For the year ending March 26, James Cropper recorded 30% growth in sales, ahead of prior market expectations, due to strong demand across all divisions.

However, the company now expects adjusted pretax profit to be £3.5 million, a sharp rise from £1.1 million the year before, but below prior expectations of £4.9 million.

The lowered forecast is due to the conflict between Russia and Ukraine, and the resulting jump in energy costs, which have affected the Paper division the most, due to being the most energy-intensive division. The average wholesale gas price moved from 50 pence per therm to around 250p.

James Cropper said it has already taken steps to decarbonise the Paper division and has targeted a move away from gas entirely by 2030.

‘While the situation in Ukraine has resulted in uncertainty concerning the Paper division’s input costs in the short term, the long term opportunity for the group remains positive, and we are encouraged by our ability to flex pricing to respond to rising input costs. Building on a strong track record of growth, the year is expected to deliver a new sales high across the group,’ the company said.

James Cropper will publish its annual results on June 21.

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