UK dairy group Dairy Crest said today (30 September) that its cheese division was driving growth as the company faces a competitive milk market.

In a trading update, the Cathedral City maker said the group’s trading was “ahead” of last year and revealed that “increased profits” from its cheese business had “underpinned” that growth.

Two weeks ago, Dairy Crest was forced to allay fears about its milk operations after a profit warning from rival Robert Wiseman Dairies hit shares in both businesses.

Dairy Crest said today that its milk sales to major retailers had increased during the six months to the end of September.

The company admitted the milk market was “very competitive” but pointed to yesterday’s announcement of the renewal of its contract to supply Morrisons. Dairy Crest added that its contract to supply Sainsbury’s would start early next month.

Elsewhere, sales of Dairy Crest’s five key brands, which also include Clover and Frijj, had grown year-on-year.

Chief executive Mark Allen said Dairy Crest had put in “another good performance” during the period.

“We are operating in extremely competitive markets. Input costs have increased and consumer confidence remains fragile,” Allen said.

“In the first half, our broad base, high-quality brands, strong programme of efficiency improvements and focus on cash generation have allowed us to balance these conflicting demands successfully. We are confident that we can deliver profits this year in line with our expectations.”

Dairy Crest will announce its half-year results on 11 November.