GRAHAM’S The Family Dairy has underscored the intense pressure on margins in the dairy sector as profits dipped in its most recent financial year.

However, managing director Robert Graham jnr, said the 78-year-old firm had made “significant progress” in the period to March, highlighting successful moves into new products, investment in raising capacity and the opening of a new logistics facility in Kintore, Aberdeenshire.

Graham’s saw turnover leap by 20 per cent to more than £100 million over the period, as revenue was boosted by the additional volume brought by acquisition of the Glenfield dairy in Fife from First Milk, which completed in 2016.

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But profit before tax dropped to £1.3m from £1.43m amid industry-wide pressure on margins.

Mr Graham said improving margins is an ongoing focus for the business, noting that progress in this area is crucial to the company’s hopes to continue investing in the business. The period saw the company invest £1.4 million in new plant and machinery. Asked to comment on the reasons for the margin pressure in the dairy market, Mr Graham replied: “The dairy market is a big market, it’s also very competitive. Managing the supply and demand of raw milk, set against a backdrop of an underpinning dairy market that is a lot more volatile than it was 10 years ago, brings a lot of challenges.”

He added: “Improvements in managing that, and how we forecast supply against how we are forecasting markets, is something we have done a lot of work on in the last 18 months, particularly in the last 12.”

While there remains pressure on margins, Mr Graham the company had seen “phenomenal growth” in turnover last year, driven partly by acquisitions and the launch of new products.

The acquisition of Glenfield dairy has also allowed the firm to diversify into products such as strained yoghurt and cottage cheese. These include its Protein 22 snack, which has broken into overseas markets such as the Middle East, and Quark, a soft cheese. Mr Graham said an ability to innovate, and be “quick about it”, and launch products like these is part of its strategy to improve margins.

Asked whether the company is looking to pursue deals like its acquisition of Glenfield, where the company has invested more than £1m in the last 12 months, Mr Graham said there is “more we can do” at its existing sites. He that the company would achieve a “step change” in its growth strategy should it get the go-ahead to begin the development of its proposed, £20m national dairy centre in Stirlingshire.

“That allows us to really accelerate both our new product development and production capability, as well as scale,” Mr Graham said.

The plans, first revealed in 2015 and part of a broader scheme involving the building of 600 homes, new primary school and other public amenities at Airthrey Kerse, are currently being considered by the Scottish Government reporter after being refused by Stirling Council.

Mr Graham had no update to give on the long-running episode yesterday, but noted that it was “interesting” that the Scottish Government has this week tabled new legislation aimed at streamlining the planning system. He said Graham’s plans, which involve a joint partnership with housebuilder Mactaggart & Mickel, would solve what it claimed was Stirling Council’s 1,000-unit shortfall in land supply.

Meanwhile, Mr Graham said a focus for the company since year end has been on building sales south of the Border. Graham’s currently does around 20 per cent of its business in England and said growing sales in the domestic market remains a priority, with the bulk of dairy products consumed in the UK imported from overseas.