Aberystwyth Bakery at Llanbadarn Fawr is to reduce its workforce by 40, leaving just 37 employees.

The announcement is a blow to the company which took over the running of the factory in December 2002.

The company produces confectionery, specialist breads and frozen products.

Buy-out

Previous owners, Elisabeth The Chef were on the verge of closing down the factory before Aberystwyth Bakery's managing director, Ian Williamson, led a buy-out supported by private bankers and government agencies.

After the 2002 takeover, �250,000 was spent on new equipment to make the bakery more competitive.

The deal was secured with a Regional Selective Assistance grant from the Welsh Assembly Government and a processing and marketing grant managed by the Welsh Development Agency (WDA).

Finance Wales, the agency established to encourage the growth of Welsh businesses, also supported the deal with a �100,000 loan.

A WDA spokesman said they were working with the company to safeguard jobs and to support the development of new markets.