First Milk has posted a £7m loss for the year after volatility in the gobal dairy ingredients market hit profitability.

Turnover in the year to 31 March 2009 was down 3% to £582m, with losses after tax of £7.1m, the Scottish farmer-owned co-operative reported this week.

The losses included a non-recurring charge of £3.6m related to restructuring and redundancy costs at its Claygate and Maelor sites, but falling returns in powder, cheese and whey had been the primary cause for the decreased turnover, First Milk said.

Farmer-owned co-operatives are under particular scrutiny since the collapse of Dairy Farmers of Britain in June, but First Milk stressed its figures reflected the fact it had dipped into its reserves and increased returns to members by 3.76ppl compared with the previous year.

"Recognising that rising on-farm costs were putting serious financial pressure on our producers, as a board we took the decision in late 2008 to utilise the reserves we had built up in order to shelter members as much as possible from the market downturn," said chief executive Peter Humphreys.

Brands continued to perform well, with the Lake District Cheese Company the fastest-growing branded Cheddar, the company claimed.

The business plans to increase the level of its cheeses that are sold as brands from 5% in 2008/09 to 20% in 2009/10.

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