Butter and cheese maker Dairy Crest Group plc (LON:DCG) forecast higher half-year profit than last year but warned that rising prices would hit second-half butter margins.
Dairy Crest said it expected volumes of key brands Cathedral City cheese, Country Life butter, Clover spread and Frylight cooking oil to top last year's in the first half.
The latter three increased volumes significantly but Cathedral City is expected to decline modestly, due to a decision to cut prices on it less than rivals, before rising again in the second half.
Chief executive Mark Allen said: "Recently we have seen inflation across all dairy markets. To date we have announced increases amounting to 12% in the milk price we pay our farmers.
"Cream prices have been particularly affected, doubling over a very short period. This sudden cost inflation is likely to have an impact on butter volumes and margins in the second half.
"Dairy Crest is well placed to deal with inflationary pressures. As such our full-year outlook remains unchanged."