Bridge of Allan-based Graham’s The Family Dairy said its sales fell slightly to £83.6 million in the year to March 2016 from £86.5 million the year before in a “particularly challenging year” in which farmers produced more milk than “the market could comfortably consume.”

Profit before tax was also down slightly to £1.43 million from £1.5 million.

Graham’s said it continued to pay its farmers the highest price in Scotland.

Graham’s said it signed significant deals during the period, acquired a new site in Fife, invested in production capabilities and expanded its product range.

“Graham’s commitment to quality and innovation has led to more than half of Scotland’s population buying Graham’s products,” said the company.

“However, the global milk market has shown a great deal of instability and 2015 was a particularly challenging year in terms of milk volumes, with farmers producing more milk than the market could comfortably consume.

“The oversupply led to significant balancing costs for Graham’s and deflation in the market.

“During this period, Graham’s continued to pay its farmers the highest price in Scotland, and with the market showing signs of recovery in the second part of 2016, Graham’s has increased its price to farmers in recent months.”

Robert Graham, managing director, said: “We are pleased to have delivered a solid performance during what has been an incredibly challenging time for the entire dairy industry.

“As farmers ourselves who continue to milk our own cows, we understand the pressures farmers face and this why we continue to pay them the highest price in Scotland.

“We truly value the relationships we have with our 100 farming partners and are committed to continuing an open and regular dialogue to the benefit of all of our businesses going forward.”