THE UK's biggest fresh milk supplier revealed a slump in profits as it struggled to pass on rising costs to its supermarket customers.

Robert Wiseman Dairies, which supplies a third of the fresh milk consumed in the UK, said pre-tax profits fell 42 per cent to £11.8m in the six months to October 1.

It has put up prices to its farmers three times since March amid rising fuel and raw material prices. Wiseman warned the squeeze on its margins could intensify if costs rise further but hopes a new organic milk contract with Tesco will help it boost volumes.

And it unveiled a £2m tie-up with a New Zealand dairy that will allow it develop a type of milk that can be drunk by people who are intolerant to milk but are not diagnosed as lactose intolerant.

It has formed a joint venture with A2C, which sells a range of a2-branded milk products that do not contain a type of protein that can cause digestive discomfort and have proved popular in Australia. Wiseman hopes to launch similar products in the UK next summer as part of its Bringing People Back To Dairy initiative.

Studies have shown that as many as one in five people find it hard to digest milk but only one in 20 in the UK are believed to be lactose intolerant.