Company spokesman Peter Ambeck-Madsen said the results for 1998 would not be published before the end of April, but the Danish company would "certainly" make a loss. He said "this will not be a catastrophe because Lego ... is strong enough to withstand this first setback".

Lego hopes its Mindstorm robot toys will revive the brand

Mr Ambeck-Madsen said the company would have to reorganise its workforce, but refused to confirm reports in a Danish newspaper that Lego would sack 10% of its 10,000 employees.

According to the newspaper report, the redundancies will affect mainly people working for Lego's finance, sales and marketing departments. Lego employs 4,000 people in Denmark.

The downturn has not come as a surprise. During the 1990s, Lego regularly posted profits of more than $62m (£37m). By 1997 this had shrunk to $9.7m (£5.9m).

Kjeld Kirk Kristiansen, president of Lego Group, runs the family business

The company does not rely solely on its plastic bricks. Legoland theme parks, Lego clothing and a new range of electronic toys are generating revenue as well.

Lego is a family-run firm, owned by the Kristiansen family. The company was founded in 1932 by Ole Kirk Christiansen, a carpenter who had a sideline in wooden toys.