Dairy processor Arla has issued its third profit warning in 12 months, after losing volume to competitors and slower than expected sales of its branded Cravendale milk.

The company announced that profits would fall £5m short of expected levels in the second half of the financial year, sparking a sell-off of its stock

Analysts have now written down full year profits to £42m – a 25% fall on initial expectations.

Though Arla said its butter and spreads brands were still performing well, the stalling sales of Cravendale have hit the company’s bottom line.

It blamed the March cut to the retail price of supermarket milk, which had opened an unsustainable price gap with Cravendale.

Arla was said to be looking at a price cut for the extended-life milk to restore its growth potential.