A return to profit at the legacy Irish dairy business has prompted Glanbia to lift its earnings hopes, despite warning that milk prices looked likely to "trend lower" for the rest of 2010.

The dairy and ingredients group said that dairy prices "appear to have peaked", following a revival in milk supplies from the "weak" levels earlier in the year which drove the market higher.

"Milk production is beginning to increase in the main producing regions, and is expected to continue to do so for the rest of the year and into 2011, easing supply constraints," Glanbia said.

Prices would, over the whole of 2010, come in near historic averages, but below the levels of the 2008 market peak.

'Strongly ahead'

However, the revival had already helped Glanbia's Irish dairy business, the country's biggest, which the group attempted to sell earlier this year, return to the black after its first ever loss last year.

The unit had performed "strongly ahead" in the January-to-June half, helping the group's Irish division report operating profits up by more than three times at E19.1m.

Glanbia's US cheese and health products business reported a 5.8% rise top E47.5m in operating profits, helped by firm demand for nutritional drinks and food bars.

"There is strong demand globally for sports nutrition and protein fortified products for key areas of weight management, healthy ageing [and] infant formula markets," the company said.

Target raised 

With group earnings for the half soaring 51% to E54.6m, on revenues up 9.7% at E1.04bn, Glanbia said that it was now expecting to beat a target of "mid-teens" growth in earnings per share for the full year.

Underlying earnings per share were now expected to grow by about 20%, John Moloney, the company's chief executive, said.

"While the global economic environment remains uncertain, the board, taking current trading conditions into account, is confident Glanbia will achieve strong revenue, operating profit and margin growth," he added.

Glanbia shares closed 0.6% higher at E3.40 in Dublin.