Dairy Crest has announced a 15% rise in sales from its brands - Cathedral City, Country life, Clover and Frijj - in the first quarter 2012, compared with the same period last year.
In a statement chairman Anthony Fry said: "As expected it has been a difficult quarter for our Dairies business, along with the rest of the sector. However, we have taken decisive steps to return it to a satisfactory level of profitability. We have set a medium term target of 3% return on sales and are making progress towards it.
"Plans to close two dairies announced in April are on schedule and resulting capacity reductions are allowing us to improve selling prices in parts of this business. Lower returns from commodity cream markets have also led us to announce milk purchase price cuts. Regrettably these cuts have put pressure on our supplying farmers and we are working with them on plans to reduce the impact of these cuts. These plans include the early adoption of a new code of practice in relation to our milk supply contracts."
He said the sale of its French spreads business, St Hubert, for £344M will substantially reduce the company's net debt.
Fry added: "Total sales of our four UK key brands have increased by 15% compared to the same period last year. We continue to increase our investment in marketing these brands and for the first time all four brands will feature on television in the first half of the year.
"We remain committed to making efficiency savings of £20M this year and are on track to meet this target."
Mark Allen, Chief Executive, commented: "Our focus at the start of the year has been on doing the right things to restore our Dairies business to a satisfactory level of profitability as well as to continue to grow our brands and we are pleased with the progress we are making.
"At the same time we are taking another significant step in the evolution of Dairy Crest by following through our strategic decision to dispose of St Hubert and refocus on the UK."
Dairy Crest expects to issue its half-yearly trading update on 24 September 2012 and its Interim Results for the six months ending 30 September 2012 on 8 November 2012.