Expansion plans for upbeat Arla

Arla Foods, which has 1,415 staff in Settle and Stourton, on the edge of Leeds, posted a profit of DKK 697 million (81.2m) after tax, up from DKK 263 million for the same period last year.

Turnover reached DKK 23.8 billion (2.77bn) for the first six months of this year, compared to DKK 22.3 billion but it warned, however, that it faced a "challenging" autumn because of expected falls in commodity prices.

The co-operative, which is one of the world's largest dairies and produces Cravendale milk and butters Anchor and Lurpak, last month invested 70m as it ramps up production in cream, crme frache and cottage cheese. It closed its Northallerton creamery in June and some of the staff transferred to Stourton

Arla expects to produce 7,000 metric tonnes of cottage cheese this year and Hanne Sondergaard, deputy chief executive for the UK, said they hoped to expand this further.

"We are looking at growing cottage cheese. The total value of that market is 16,000 tonnes and we want to be the market leader. We are targeting significant growth." Arla, whose core markets are Sweden, Denmark and the UK, revised its annual profit target from DKK 950 million (110.7m) to DKK 1.2 billion (140m) after announcing it wanted to increase its surplus from 2 per cent to 2.5 per cent of turnover.

Frederik Lotz, group chief financial officer, said: "Arla Foods has had a good half-year during which we increased the milk price paid to our owners three times.

"Last year's extensive savings campaign trimmed the group's costs and we've succeeded in maintaining the low cost levels achieved by the savings campaign in 2009. The accounts demonstrate that we have a sound platform for growth."

The firm said it had seen increasing growth in Russia, China and the Middle East this year with the potential to grow its core markets as well. Its performance was driven by rising exchange rates and increased prices in global markets, where Arla sells butter, cheese and powder to industrial customers, but the firm said it expected commodity prices to drop.

Mr Lotz added: "We have to expect lower earnings from the commodity markets in the second half of the year and at the same time we will see the full effects of the increases in the Arla price. A decisive factor will be how consumer confidence develops. European consumers still bear the scars of the economic recession – many are still cautious and prefer discount products to brands and this obviously impacts on earnings."

The firm also said its branded business had performed well after investing 35m in brands Lurpak, Anchor, Lactofree, the dairy alternative product range, and Cravendale milk.

About 80 million litres of Cravendale are produced each year at Stourton, with the rest coming from Hatfield in Hertfordshire, and Arla said the brand had doubled in size over the last four years.

It is forecast to break through the 200 million-litre barrier by the end of the year, is one of the UK's fastest growing grocery brands and is commanding a five per cent share of the fresh milk market.

Arla said sales of Lactofree had grown 37 per cent year on year and Arla said awareness of it had increased after it began a television advertising campaign in January. Earlier this year the Denmark-based Arla Foods amba board offered Arla Foods Milk Partnership, the UK direct milk supply group, the chance to invest more in the UK business.

Arla, which does not provide figures for UK turnover, also plans to develop a 150m factory on the edge of London, which would open in 2010, although it is still negotiating to buy the land.