Lakeland Dairies has announced a 26 per cent drop in pre-tax profits last year, reflecting the impact of foot-and-mouth disease on its business. The global economic slowdown also affected its performance as profits fell to €3.97 million and turnover slipped to €217.8 million from €219.9 million a year earlier.

The Cavan-based dairy co-operative said the outbreak of foot-and-mouth disease in Northern Ireland and on the Cooley Peninsula meant Lakeland was unable to collect and process its milk supplies inside the exclusion zones in the normal way.

It had to collect milk under stringent conditions approved by the Department of Agriculture and arrange for it to undergo approved processing, adding to its costs.

Its dairy division reported turnover of €162 million, down €5 million on 2000. Lakeland said that after a strong first half last year, dairy markets declined from July with a significant weakening in the wake of the US terrorist attacks on September 11th.

However, its agri-trading division performed well, increasing turnover to €56 million from €53 million a year earlier.

The co-op also said its balance sheet remained strong. It entered 2002 with no borrowings and had retained capital and reserves of €48 million at the end of 2001 compared to €44 million a year earlier.

It recently acquired the Bailieboro milk processing business from Kerry Group and Nestlé's milk processing plant in Omagh, Co Tyrone.

This has left it with modest borrowings and a projected full-year annual turnover of €380 million, Lakeland said.