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Cathedral City cheesemaker Dairy Crest has warned that more price increases are on the way as it battles to offset soaring costs.

The firm said it would raise prices to combat rising fuel, energy and commodity cost pressures.

Dairy Crest has passed on many of its higher overheads to consumers after milk costs rose by a third on last year.

It has been able to make good progress over the past 12 months as a result and also thanks to a renewed focus on its flagship cheese and spread brands. However, Dairy Crest will take a one-off £4.5 million hit from an unfavourable supply contract.

The results to the end of March will also be impacted by an expected £9.4 million fine imposed by the Office of Fair Trading after the group was found provisionally guilty of colluding to fix dairy prices in 2002 and 2003.

Dairy Crest is among a number of dairies and supermarkets that have admitted their part in the affair and are set to pay reduced fines as a result. Mark Allen, chief executive of Dairy Crest, said: "The dairy industry has experienced well-documented volatility over the past year. The market continues to be challenging particularly in respect of input cost inflation, but we are optimistic that our business is well placed to deal with this.

Shares in the business fell 3%, with analysts saying the OFT ruling and news of the supply contract hit had taken the shine off its full-year trading update.