Ireland's second biggest dairy processing co-op - Lakeland Dairies - has reported a 16% increase in profit before tax to €7.9m for last year.

Lakeland operates in 15 counties and processes over 700 million litres of milk a year, mainly for export markets.

Its chief executive Michael Hanley said the international environment was challenging, but that the group had made strong progress.

Lakeland's foodservice division saw revenues increase by 10% to €161.5m. It described this as an ''excellent result'' given the fact that most of its foodservice customers are mainly reliant on consumer markets.

The company said that it won several new customer contracts during the year, while it also secured new business from long standing customers.

Its agri-trading division saw revenues jump by 28% to €56.5m last year. Lakeland said supplementary feeding levels were higher than normal due to very difficult weather conditions.

But revenues at its food ingredients division fell by 9.5% to €255m due to overall volatility and pricing pressures in the international markets. The company said that a world surplus of dairy ingredients affected market returns and this was further accentuated by reduced consumer spending on food products requiring dairy ingredients.

Co Cavan-based Lakeland sells 170 products in 70 countries.

“Overall prospects for the global economy remain uncertain and weak economic conditions are likely to persist in developed economies throughout 2013,'' the company's chief executive said.

''Significantly stronger growth is expected in emerging economies. Global milk supplies have reduced and import demand remains solid in key importing regions. This will create an upside potential for Irish dairy exports and prices in 2013,'' Michael Hanley added.