Grahams The Family Dairy Group has made a loss for the first time in its history as the surge in inflation poses challenges for businesses across Scotland.

The Bridge of Allan-based group said “exceptional inflationary pressures” wiped out the benefit of increased sales across its product lines in the latest financial year, which directors described as extremely challenging.

The latest accounts for the group filed at Companies House show it made a £1.3 million loss before tax in the year to March 31, after posting a £1.6m profit in the preceding year.

The company fell into the red despite increasing sales by around 20% during the year, to £153m, from £127m.

While consumer spending has been under pressure, Grahams has felt the benefit or investment in new products such as Icelandic-style Skyr yoghurt, which it sells in pouches.

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The big change in the bottom-line position highlights the scale of the challenges posed by inflationary pressures on the cost front. These became apparent amid the recovery from the pandemic and intensified after Russia launched its full-scale war on Ukraine in February last year.

“We have continued to produce the same high quality of produce from the same local ingredients and as a result, this is the first year, since incorporation that we have made a loss,” wrote directors in the accounts.

Companies House records show the group was incorporated in 2007. The group developed out of a  business that was started with 12 cows in 1939, on a farm at Bridge Of Allan. Managing director Robert Graham belongs to the third generation of Graham family owners of the business.

In the accounts, directors highlighted the impact of increases in the price of raw materials and indirect costs. The surge in energy bills has compounded the problems caused by rises in raw material costs for production businesses.

However, describing Grahams The Family Dairy as Scotland’s number one food brand, directors said the group had made good progress during the year. They cited the increase in turnover and investments made in future growth.

The group has “invested hugely” in its manufacturing sites and innovation plans to ensure that it can continue to meet demand in a sustainable and responsible way.

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The group expects to generate returns on the investment, in terms of increased sales, profitability and balance sheet strength, in the current year.

Directors appear confident that the group has been able to respond to the challenges posed by developments in the economy while continuing to have regard to the interests of stakeholders. They said the stakeholders include customers and the many farmers the group works with.

“As farmers ourselves, who continue to milk our own cows, we understand the pressures farmers face,” wrote directors.

“Notwithstanding the challenges often associated with farm gate price discussions, our direct relationships help us maintain good relations with our key suppliers.”

They added: “We work closely with our customers to manage the impact of increasing costs on our selling price. We work in a very competitive market place with the price of milk and cream continually under pressure.”

The accounts say Grahams has grown to become Scotland’s largest independent dairy business. It has a 6,000-strong customer base.

The average monthly number of employees fell to 642 in the latest year, from 672 in the preceding period.

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The group paid £557,462 dividends in total, against £651,820 last time.

The group noted it had invested in heat efficiency and water minimisation programmes at its Airthrey Kerse dairy in collaboration with the Scottish Government through the Scottish Industrial Transformation Fund. It is developing solar power generating facilities at Mains of Boquhan.

Bank interest charges increased to £703,000 in the latest year from £123,000. The value of loans outstanding increased to £9.4m, from £6.5m.

Lenders have increased borrowing costs in line with the series of interest rate increases made by the Bank of England in its bid to reduce the inflation rate.