Australia-based food and beverage group Lion has reported a fall in annual sales from its combined dairy and drinks arm – but said growth from higher-margin products helped the unit’s underlying profitability rise.

The company, owned by Japan’s Kirin Holdings, said revenues and volumes from its Lion Dairy & Drinks division were down in the 12 months to 30 September, without disclosing specific figures.

Lion pointed to its decision to leave the market for “everyday” cheese and the loss of some of its private-label milk contracts. In March 2015, Lion struck a deal to sell its everyday cheese business to Canadian dairy group Saputo.

The group said it had seen “a solid increase” in the underlying EBIT from Lion Dairy & Drinks, boosted by growth “in the higher-margin, milk-based beverages category”.

Lion said its “priority dairy categories” are “performing well”, in particular milk-based beverages and yoghurt. It cited, for example, the “12% growth year-on-year” from Dairy Farmers Thick & Creamy.

During the year, Lion said its yogurt business in south-east Asia had seen “30% growth”. The company claimed it was now “the number one yogurt manufacturer in Singapore and the number one imported yogurt manufacturer in Malaysia and Thailand”

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It added: “With this proven track record of achieving leadership positions in a short period of time together with its continued focus on driving investment to develop sustainable brand franchises, the business is well placed to achieve its growth plans for south-east Asia and meet the inevitable challenges of currency movement and regulatory issues expansion that the region may present.”