Müller UK & Ireland’s annual losses rose to more than £100m last year as a tough liquid milk market hit sales.

Revenues fell 4.2% to £1.34bn in the year to 31 December 2015, from £1.4bn the year before, driven by “intense competition from both national and local milk processors”.

The processor managed to grow volume market share in chilled yoghurts and potted desserts from 20.7% to 21.1%, but value share decreased from 22.5% to 22.1%, driven by deflationary pricing pressures.

Müller secured a dominant position in the UK milk market with the £80m agreement to buy Dairy Crest’s UK milk operations in November 2014. However, the accounts do not reflect the impact of the deal as it only closed on 26 December 2015, after a lengthy regulatory approvals process.

Müller UK & Ireland had focused on identifying cost savings within its supply chain to protect its bottom line.

During the period Müller said it reduced waste, reduced the quality of plastic within its polybottles and focus on the delivery profile of its customers.

“All of these activities are intended to reduce cost within the business and allow us to make positive margins in an intensely competitive sector of the dairy industry,” it stated.

Its gross profit improved 7.4% to £377m despite the fall in sales, but a near-50% rise in administrative expenses meant operating profit before amortisation and impairment fell 10% to £73.5m.

Write-downs of £185m meant its reported loss for the year grew 8.4% to £106m from £97.8m in 2014. These amortisation and impairment costs related to the ongoing writedown of the remaining value of the Wiseman brand name following its integration into Müller UK & Ireland structure and the creation of Muller Milk & Ingredients.

Its average number of UK employees in 2015 dropped by 100 to 4,979 compared to 2014, but this figure will rise to around 12,000 next year with the completion of its Dairy Crest milk acqusition and the deal earlier this year to buy UK logistics group Great Bear.

Müller said the Dairy Crest deal would protect it against market uncertainty and “improve economies of scale”.

Andrew McInnes, MD Müller Milk & Ingredients, told The Grocer last month: “We view the acquisition of Dairy Crest’s dairy operations as an opportunity to create something special in the UK dairy industry.

“It is important to stress that we must substantially increase operational efficiency and make cost savings within the milk and ingredients business if we are to have the capability to be able to reinvest in the supply chain and product innovation which can add real value in this category.

“We are pleased with our progress to date… there is a lot to do but our integration plan is on track and we fully expect to maintain the pace we have established.”