Donegal Creameries saw a net profit increase last year after it sold some assets, but price pressure in the commodities market held back sales and operating profit.

Finance director Anthony Hanlon said that, while the milk business was likely to remain under pressure in the future, a reorganisation of the group's property assets had the potential to create increased profits for the group in the future.

He said he expected profit to rise in line with market expectations this year.

Net income rose 14 per cent to €2 million, while operating profit declined almost sixfold to €120,000. Pretax profit was up 76 per cent at €3.6 million. The divergence relates to a significantly higher tax charge caused by the sale of financial assets and issues concerning student residences that it owns.

During the year Donegal Creameries sold the shares it held in IAWS and some sites on its An Grianán farm in Letterkenny for a profit of €3.9 million.

Mr Hanlon said it had also benefited from a reorganisation of its property portfolio, which includes the Letterkenny student residences, the An Grianán farm and several warehouses.

The group has appointed a property manager to generate better returns from that quarter. A revaluation more than doubled the portfolio's value to €25.2 million from €12.4 million.

Turnover was little changed at €111.7 million as the dairy and agri-businesses came under significant pricing pressure. However, the acquisition of Milburn Dairy and Ennis Foods and a better performance by the potato unit helped offset some of the declines.

The company will pay a final dividend of 7.5 cent per share, bringing the total dividend to 13 cent, up 8 per cent on 2004.

NCB raised its price target for the company, citing positive cashflow, the possibility of future positive land revaluations and a decline in debt.

The shares, which switched to Dublin's IEX last year, yesterday rose 6 per cent to €4.40.