Shares in Robert Wiseman Dairies tanked 26%, or 126p to 359p, after the milk producer said future profits will be hurt by "competitive pressures."
In a statement, the company said operating profit will fall by £7m in the second half of the year, and by £16m in the full financial year to March 2012 -if there is no improvement.
Robert Wiseman said this was "very disappointing" and that its focus now is to cut costs to lift profit margins.
Food processing companies are being squeezed by rising commodity costs and by pressure from supermarket chains, whose sheer size allows them to force suppliers to lower their prices.
"Our financial performance continues to be impacted by volatility in oil related costs, which have remained higher in the current period than in the equivalent period of the previous year. While fuel costs have eased, the cost of plastic has not declined by the same level," the Scottish group said.
Milk sales, however, rose 8.5% during the 23 weeks to Sept. 11.
The announcement sent the shares of rival Dairy Crest 7.5% lower, or 28.3p, to 346p.
