Campina, the Dutch dairy group, said today (20 March) that a sharp rise in revenue from its ingredients business drove higher group sales last year.

The company, which is set to merge with local peer Friesland Foods later this year, said turnover from its industrial products business jumped 30% in 2007.

The increase helped push group revenue to EUR4bn (US$6.2bn), a rise of 11% on 2006.

Campina said its ingredients business had an "extremely successful" year thanks to rising dairy commodity prices and higher volumes from its domestic dairy feed unit.

However, the company admitted that, with dairy commodities becoming more expensive, margins on its consumer brands were hit.

Campina said it had passed on "substantial price rises" to consumers but profits from its milk, dairy drinks, yoghurts and desserts slipped.

CEO Kees Gielen said 2007 had proved "a turbulent year". He said: "For the first time in our history we were confronted with prices for basic dairy products that rose to record highs in a very short space of time. Nobody could have predicted that. However, we responded decisively and took steps to reflect these increases in our prices. This was tricky because our policy is to establish long-term relationships with our clients and buyers.

"We therefore took steps in the second half of 2007 to reconcile this policy with the need to implement vital price increases, since costs had shot up throughout the entire dairy chain from production to transport."

Campina's overseas operations put in a mixed performance. The company's Russian business posted "excellent results". However, sales in the UK fell, while margins in France and Spain were under "severe pressure", Campina said.

Looking ahead, Gielen said Campina would look to plough more cash into its "health products". Campina's weight control drink Optimel saw sales jump 56% last year, while sales of low-fat cheese Campina Milner climbed 21%.

"In the wake of this success we'll be making substantial investments in health & wellness concepts over the coming years, with a view to ensuring that they will make an even greater contribution to Campina's turnover," Gielen said.

The co-operative did not disclose a profit figure for 2007 but said the cash milk price for its member dairy farmers rose 16.5% to EUR34.57.