Cavan-based Lakeland Dairies slipped into the red last year, blaming reforms to the EU's Common Agricultural Policy (CAP) and reduced subsidies for dairy commodities.

The co-op also highlighted its policy of "strongly supporting" the milk price paid to producers, regardless of market conditions, adverse currency movements and higher energy costs.

Lakeland recorded an operating loss of €5.7 million for the year, before exceptional items and after interest charges. This compared to a profit of €830,000 in 2004. Turnover fell from €442.5 million to €420.3 million.

The results featured an exceptional gain of €10 million on the disposal of shares in IAWS plc, with Lakeland raising a further €900,000 by selling property. The co-op used these funds to pay down bank debt.

At year end, Lakeland retained capital and reserves of €70 million, allocated to "forward planning requirements" and to ensure its strength in the industry.