LURPAK butter maker Arla left forecasts untouched yesterday as it looked to recover from its warning that profits would be hurt by higher oil prices.

The UK's largest supplier of milk said in August that it had not been able to protect margins from the pressures of rising oil costs and utility bills.

Arla is based in Leeds but has dairy processing plants in Northallerton, North Yorkshire, and in Newcastle.

It is due to post full-year figures on November 30, but said yesterday that it would meet revised expectations for the period and that it had also put in place a range of measures to offset the pressures. It did not provide further details.

The supplier of milk to Asda and Tesco also said it continued to increase volumes in the supermarket sector, despite a continuing competitive market.

Oil prices matter to Arla because they determine how much the company pays for its packaging and fuel, while parallel rises in electricity and gas push up the cost of powering its machines.

Chief executive Tim Smith said in August the company was continuing to examine where costs could be eliminated beyond the savings made from the merger of Arla UK and Express Dairies in 2003.

Arla shut its distribution centre in Stratford, east London, earlier this year after closing four other sites, including a dairy at Bamber Bridge, in Lancashire, and a glass bottling plant at Hatfield Peverel, in Essex.

The firm also said at the time that it was looking to see whether the big supermarkets could be persuaded to put up prices again to help it mitigate the pressures on its balance sheet from higher fuel costs.

However, Mr Smith said there were no plans to approach farmers who supply Arla with milk to see whether they would be willing to cut their prices.