Express Dairies' chief executive Neil Davidson said the merger could lead to job cuts of "a number of hundreds".

The areas most vulnerable are the two firms' manufacturing and administrative operations.

Express said it was too early to give a precise figure of job losses, and said it would try to lose most of the posts through natural wastage or voluntary redundancy.

However, it did not rule out the possibility of compulsory redundancies.

Higher profits

The merger between Express and Arla is currently awaiting approval from competition authorities after being approved by shareholders earlier this year.

The combined group - to be renamed Arla Foods UK - will have a total workforce of 7,000 and a turnover of nearly �1.3bn.

"There inevitably will be administrative savings, but we will need to look at our factory profile too," Mr Davidson said.

His comments came as Express Dairies unveiled a 23.5% rise in pre-tax profits before one-off items to �28.4m.

The company also said it was seeking damages worth �11.5m from the supermarket chain Safeway over the alleged breach of a milk supply contract.

Express said the contract was "unilaterally terminated" by Safeway last December, and said it believed the move went against best practice as recommended by the Supermarket Code.

Safeway said it hoped to reach a settlement with Express Dairies over the matter.