Robert Wiseman Dairies is looking for a smoother ride this year after 12 months of market upheavals knocked the cream off its profits.
The Scottish group with a flagship milk processing plant at Droitwich has lost lucrative supply deals with supermarket-chains Asda and Morrisons in recent months.
But it is making up the lost volumes by way of enhanced contracts with Tesco and Sainsbury's.
Glasgow-based Wiseman yesterday reported a 15.3 per cent drop in pretax profits to £24.7 million for the year to April 2 - but described the results as " encouraging" against the backdrop of last year's events.
Chairman Alan Wiseman said: "We believe that with all the major retailers now having made their decisions about supply arrangements, we can now look forward to a period of greater stability within the industry."
Even after losing its £40 million deal to supply Morrisons earlier this month, the group said its dairies would manage to process more milk than last year as a result of organic growth.
Wiseman said it was still looking at ways to offset the loss of the Morrisons contract, which will not be renewed when it expires in October.
Mr Wiseman said he was confident that the foundations were in place to allow the company to return to profitable growth.
His optimism is founded in part on the fact that supermarket dairy sales are increasing as traditional doorstep deliveries become history.
He added: "We were obviously disappointed to cease supplying Morrisons, but despite this, the board still expects that the new financial year should see a record level of sales volume and turnover."
Mr Wiseman said the Droitwich plant, which represents a £55 million investment and employs about 500 people, was doing "spectacularly well" and was operating at about 95 per cent capacity.
Group turnover increased by 3 . 1 per cent to £489.2 million in the year to April 2. This compared with a 53-week trading period last year.
Wiseman secured 100 million litres in extra milk volumes from Sainsbury's and Tesco last year. It said the new Tesco deal had resulted in new weekly sales records and a strong start to its financial year in sales terms.
Sales of low-fat product The One continued to climb steadily helped by television advertising, and the group was optimistic of maintaining this progress.
Plans for a new dairy in the South- west were welladvanced with milk production expected to start by the end of 2006.
The company has been hit by steep increases in the cost of HDPE, the raw material used to make its plastic containers, and higher energy bills.
It recently increased the amount it pays farmers, but warned the move could only be temporary if its long-term competitiveness appeared to be at risk.