Profits at Castle Dairies have crashed 80% as a result of the soaring wholesale price of butter and cream.

Castle, which lays claim to being the biggest independent butter packer in the UK, saw pre-tax profits fall 79.9% to £67,366 in the year to 31 October 2010, while turnover rose 10.9% to £10.6m. The average bulk butter price it paid suppliers had increased 62% during the year, the company said. “The packet butter market has been extremely competitive, with margins squeezed for most packers,” it added.

Efficient purchasing and other strategies had allowed the company to protect its customers from the worst of the price movements, the directors said.

During the reporting period, Castle had maintained its customer base and added significant new customer volumes and was due to gain additional listings and benefit from marketing investment over the next 12 months, the report added.