A new processing plant is set to open in Scotland in October

Revised deals between supermarkets and the UK's three top dairy firms have seen Arla secure contracts previously awarded to Robert Wiseman Dairies.

Pre-tax pre-exceptional profits fell to �22.3m ($41m) from �23.1m.

Danish-owned Arla - which merged with Express Dairies in 2003 - now has 35% of the UK fresh milk market.

Arla's leading brands are Lurpak, Anchor and Cravendale. Combined annual sales of these products now exceed �315m.

Scottish inroad

Earlier this month, supermarket William Morrison gave Arla all its supply contracts for Scotland and the company says it is on track to open a new multi-million pound dairy processing plans in Lockerbie, Dumfriesshire.

We expect to make satisfactory progress in the second half Sir David Nash, chairman See Arla's share price

The Scottish supply deal will see Arla's share of business from William Morrison rise to 50% from 35% and boost its share of the Scots milk market to 21%.

Analyst said Arla was clearly ahead of its rivals following the rejigged contracts.

"Out of the last 12 months, Arla certainly came out on top from a volume point of view," said Andrew Saunders at Numis Securities.

Functional future

Arla said most of its English dairies serving supermarkets were running at capacity, while a new dairy in Leeds will boost production of its "success story", Cravendale milk, which currently has about 4% of the milk market.

Since the merger with Express Dairies the company has axed around 750 jobs but said restructuring was almost complete and that promised cost savings of �20m a year would be delivered ahead of schedule.

Arla says it is increasingly focusing on new products, such as flavoured milks and 'functional foods" designed to give additional health benefits beyond basic nutrition.

"We expect to make satisfactory progress in the second half as we derive growing benefits from both merger synergies and our investment programme," said chairman Sir David Nash.