Dairy Crest, the maker of Cathedral City cheeses, Utterly Butterly spread and Yoplait yoghurts, said it had ridden out rapidly rising milk prices as profits were driven by its acquisition of Express Dairies and St Hubert last year.

The dairy market has been experiencing higher milk prices as a result of shortages over the past few months and the price Dairy Crest pays for its milk has risen 35 per cent since June.

But Mark Allen, chief executive, said the group had so far been able to pass on higher raw material prices to its customers.

“Whilst market conditions are challenging, we are implementing price increases across most dairy categories to reflect higher raw milk costs,” he said.

“Our customers are well aware of the market environment and have not so far resisted price increases.”

Pre-tax profit rose from £29.8m ($62.9m) to £30.6m in the six months to September 30, on revenue up 29 per cent from £588.6m to £761.4m.

Mr Allen said the group was also looking to extend its “Milk&More” online food ordering and delivery service after trials at five districts in London, and will decide about rolling out the service early in 2008.

Sales of Clover were down 18 per cent by volume in the first half owing to a product recall in May after an outbreak of mould in tubs.

Nicola Mallard, analyst at Investec, said: “There have been some small increases in cheese prices, which will have been beneficial for the group, but this was offset by the reduced profit contribution from Clover.”

The strong performances of key brands Cathedral City, Country Life, Utterly Butterly and St Hubert – the French and Italian cheese spreads business bought from Uniq in January – were helped by healthier variants. While the French spreads market is down 2 per cent by value, Dairy Crest said St Hubert’s French brands rose 4 per cent, driven by the strong growth of St Hubert’s Omega 3, the vitamins and fish oil extract.

A dividend of 7.1p (6.7p) will be paid from earnings per share of 20.3p (15.5p). Shares rose 27½p to 590½p.

FT Comment

● The shares have fallen 25 per cent in the past three months but Thursday’s figures were positive and make the stock look oversold. Analysts at Panmure Gordon calculate that the shares are trading on a forward p/e of 10 times. This makes them look cheap against branded competitors.

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