Dairy Crest said it has passed on the rising cost of raw milk to supermarkets, resulting in a 24 per cent increase in profit to £96.1 million for 2007.
As global commodity prices soar, the cost of dairy has also risen as a knock-on effect, pushing up inflation.
Dairy Crest said between April 1st 2007 and April 1st 2008, vegetable oil (rapeseed) prices rose 95 per cent; diesel went up by 65 per cent; and gas rose 58 per cent.
The dairy producer, which supplies the big four supermarkets (Asda, Morrisons Sainsbury's and Tesco) with milk, said revenue was up 20 per cent to £1.57 billion.
Chief executive Mark Allen said: "We continue to actively manage our margins. We have implemented price increases and reduced our cost base to offset inflationary pressure on milk and commodities.
"Trading at the start of the year is in line with expectations and we remain confident that our business is well placed to meet the challenges of the year ahead."
The company said most of its key brands in the UK and France, including Cathedral City, Country Life Spreadable, Utterly Butterly and Petits Filous have increased market share with double-digit sales growth.
Meanwhile, healthier versions of its top brands are also making progress, the company said.
Dairy Crest added it had made manufacturing efficiencies to keep costs down.
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