In a trading statement issued today (26 January), St Ives warned that "results for the year ending 31 July 2009 will be substantially below the board's previous expectations".

In addition, the company hinted that market conditions could force it to lower prices in order to win new business.

The statement said: "While we continue to benefit from our strategy of selling the whole range of the group's services to both new and existing customers, and from our continued focus on costs, we are not fully offsetting the effect of weakening demand and, increasingly, new sales can only be secured at more competitive prices."

St Ives also revealed that consultation was under way regarding 100 job losses from its web division and that it had reduced headcount by approximately 70 in its direct mail and display arms.

The announcement came after Unite warned that it expected 37 redundancies to be made at St Ives Plymouth.

St Ives said that declining paginations in the magazine market, due to the drop in advertising, had resulted in increased pressure on pricing, which had not yet been offset by recent capacity reductions.

"Although there has recently been some capacity reduction and a competitor closure, this has not yet had a positive effect on market prices," it said.

Meanwhile, demand for the company's direct response, commercial and exhibitions and outdoor media services has also fallen, leading to a decline in net margins.

St Ives said: "Oversupply in the face of weak demand in all these markets has led a number of our competitors to pursue uneconomic pricing policies, thus putting further pressure on margins."

St Ives reported that its book printing subsidiary Clays had also been hit as a result of the December demise of major books distributor EUK, which impacted demand.

While demand for point-of-sale products remained "buoyant", St Ives said that "late volume changes" were affecting margins.

The company stressed that its balance sheet remained strong and reiterated its intention to use the $34m (£24.4m) associated with the recent disposal of its US division to reduce group indebtedness.

Last week, it was announced that St Ives chief executive Brian Edwards was to step down from his position as part of a major management restructure.

The changes will see operations director Patrick Martell assume the chief executive role and Simon Ward, director of group sales, also depart from the company.

For more see next week's PrintWeek