Italian dairy group Parmalat saw its profit fall 10.4% in the first half as a result of rising milk prices and strong inflationary pressure in South Africa and Central and South America.

Low demand also saw profit for the period to 30 June fall to EUR146.3m (US$228.4m) from EUR163.2m for the same period last year.

Net revenue was up 9.1% on a like-for-like basis to EUR1.97bn from EUR1.81m from 2007.

The company said that the negative performance was a result of higher production costs, lower unit sales and an increase in non-recurring costs, offset in part by a favourable sales mix effect and more lucrative sales prices.

In a statement, Parmalat said it expects an increase in revenues of 3% for 2008, while it is expected that EBITDA could be around EUR350m, down 5%.

The dairy producer is currently locked in a bid with local co-operative Murray Goulburn for the acquisition of Dairy Farmers. A final decision is expected next month.