CATHEDRAL City, Clover and Country Life maker Dairy Crest has slumped to a �10.1 million loss after an “unsatisfactory” year at its milk division.

Its flagship supermarket food brands grew sales by 11% in the year to March 31 but the dairies arm, which supplies milk to retailers as well as coffee shops and hospitals, saw profits cut by more than half to �10.2 million.

With Dairy Crest slashing the value of the dairy business and taking a charge for the closure of two bottling plants, the company plunged to a bottom-line loss from a profit of �77.8 million a year earlier. Stripping out one-off factors, adjusted profits were flat at �87.4 million.

The company, which employs 4,000 people in its dairies business and 6,000 people overall, said it was facing around �80 million of cost increases this year, which it has offset through cost savings and price hikes.

Last month Dairy Crest announced plans to close a glass bottling dairy at Aintree, where 220 people work, and a site at Fenstanton in Cambridgeshire employing 250 people.

It said a recent �75 million investment programme would enable it to transfer work to its three polybottle dairies at Severnside, Chadwell Heath and Foston in Derbyshire.

The dairies business faced difficult conditions throughout the year, with intense competition among “middle ground” customers, such as small retailers, resulting in average selling prices remaining flat on a year earlier.

There were better performances in spreads and cheese, with its largest brand of Clover growing in excess of the 12% reported for the wider market following significant price increases across the industry.

Dairy Crest said the spreads division, which has factories at Kirkby near Liverpool and Crudgington in Shropshire, grew profits by 18% to �63 million.

Cathedral City, which is the UK’s biggest cheese brand, lifted sales by 12% and has a share of the branded everyday cheese category of more than 50%. It is made at its Davidstow creamery in Cornwall from milk supplied by around 400 local dairy farmers before being cut and wrapped at its Nuneaton facility.

Chief executive Mark Allen said: “Dairy Crest’s results for the year demonstrate the continued benefit of being a broadly based business.

“Double digit growth in our branded spreads and cheese businesses has offset unsatisfactory results in dairies.”