United Dairy Farmers, the Northern Ireland-based owner of the Dale Farm brand, has reported pretax profits of £3.08 million (€4.43 million) in the year to March, up from £2.17 million in the previous year.

The group, whose previous existence was as the state-run Milk Marketing Board for Northern Ireland, achieved the increase in profitability in spite of a downturn in sales, which declined to £291.99 million from £294.74 million.

Citing "extremely challenging" conditions in the dairy sector, chief executive David Dobbin said in the group's annual report that it had delivered a strong performance in its consumer products division. But he warned that the unit still faced considerable challenges in that business, with increased costs for raw milk and other bulk commodity inputs not yet fully reflected in the market.

The Dale Farm unit increased its turnover to 4 per cent to £140 million while consumer product sales turnover increased by 5.5 per cent to £94 million, he said. The turnover from ingredients sales rose 43 per cent to £10 million.

Mr Dobbin said good cost management more than offset increased losses in its commodity activities which were adversely affected by depressed markets, cuts in EU support and higher energy costs. The turnover from commodity sales fell 7 per cent to £35 million.

However, Mr Dobbin added that the improvement in commodity markets evident at the end of the fiscal year continued into the first quarter of the current period, with further significant improvements in powder prices leading a recovery in butter and cheese markets.