dairy cows

Milk processor Paynes Dairies has returned to profit after spending two years in the red as it ­renegotiated the price it pays farmers.

Pre-tax profits in the year to 30 April 2015 totalled £69,000, compared with a loss of £464,000 in 2013/14, as Paynes lowered its farm-gate prices and restructured the customer base.

Revenues decreased 15.4% to £87.3m in the year to 30 April 2015 as result of of falling milk prices and the decision to reduce volumes in response to the flood of milk in the market, the company’s newly filed accounts show.

Founder and MD Charles Payne said: “We want to support farmers as much as possible, but in the past we have done that to the extreme of cutting our margins.”

The company, which delivers more than 600,000 litres of milk a day to major retailers, convenience stores and chains, parted ways with a number of customers after ­refusing to bow to demands for lower prices, Payne added.

Sales have soared in the past five years - passing £100m in 2014 thanks to 18.5% growth on the previous year. However, profits sank from £1.6m in 2010 to losses in 2013 and 2014 as commodity costs tumbled in the dairy sector and supermarkets used milk as a key battleground in the price war.

The return to profit was a “significant achievement”, Payne said, especially after incurring bad debt costs of £800,000 in the year.

“While the market will continue to be challenging, the business is better placed to resist those challenges,” he added.