DAIRY CREST has posted a solid set of results for the first half of its financial year.

The figures went down well in the City, where Dairy Crest shares have made strong gains.

Underlying pre-tax profits rose to £38.8m in the six months to the end of September, up 10% on the same period last year.

Sales remained roughly static at £676.4m.

Consumer Foods, the added-value end of the business, achieved an 11% rise on operating profit (before exceptionals and goodwill) which hit £33.3m.

The spreads business, Dairy Crest‘s biggest earner, gave a strong showing, and cheese prices held up on the back of lower industry stock levels.

Liquid milk products also had a good first half, with fresh volumes to major retailers up 6% at the beginning of the period.

Food Services, the doorstep and ingredients business, saw profits slip £1.8m to £14.1m, mainly due to the closure of the butter/powder factory at Chard in July.

Looking ahead, chief executive Drummond Hall reiterated his warning that the loss of 210m litres of fresh milk supply to Asda and Tesco would hit profits in the year to March 2006.

“The key task is to recover our position in the liquid milk market,” he said.

Responding to a suggestion that those contracts would have to be won at a price, he added: “As far as ex-farm prices are concerned we are a long way from April.”

On the cheese front, Mr Hall said Dairy Crest continued to pay higher raw milk prices than its rivals.

“This position is not sustainable in the long term and continues to be kept under review,” he added.

The board declared an interim dividend of 5.9p/chare, up 7% on last year‘s half-time level.

Dairy Crest shares rose 13p to 374p by Wednesday (Nov 10) lunchtime.