Italian dairy group Granarolo saw its profits drop in 2010 on the back of what it described as a “complex economic scenario”, hit by rising raw-material costs and the economic crisis in its domestic market.

Granarolo said on Tuesday (22 March) that it recorded EUR3.2m net profit during the year ended 31 December against EUR18.6m net profit in 2009. EBIT nearly halved to EUR36.4m against EUR63.4m in 2009.

It said consolidated sales reached EUR884.3m against EUR899.9m in 2009.

The company said its sales decline reflected, among other factors, the impact of the growth of private-label products.

However, Granarolo said that it was well placed for future growth, as it is the “first player on the market on fresh milk and UHT milk”.

Chairman Gianpiero Calzolari said that the group has been able to “maintain stable revenues despite the economic crisis”. However, margins have been affected by the by price volatility and strong inflationary pressures that has led to a “significant increase in the cost of raw materials that have not been passed on”.

Calzolari said the company is looking to offset inflationary issues and uncertainty around any recovery in consumption with a “massive push for innovation” through new products, targeted acquisitions and a strengthening of its international position in markets that are “importing quality Italian products”.

Calzolari was quoted as saying earlier this week that it would be interested in joining a consortium in order to keep rival Italian dairy group Parmalat in Italian hands. However, the manufacturer confirmed that the company does not have the financial resources to buy Parmalat by itself. Parmalat’s future is the subject of speculation in Italy following the acquisition of a 29% stake in the business by France’s Lactalis.

Looking to 2011, Granarolo said that it expects to be significantly impacted by the “dynamics of prices of major inputs used by our company”, adding that raw milk prices have already risen by 18% during the first quarter of the year.

Granarolo said it is working on cost containment programmes to help offset these increases and has already established a plan to reduce its fixed costs.