Pretax profits at Donegal Creameries exceeded €3 million in the first half of the year.

Almost €2 million of this was generated by the group's growing property development business. Finance director Tony Hanlon said the profit arose on "one sale of a package of development land in Burnfoot [ Co Donegal]".

Turnover increased by 5.4 per cent to €57.4 million, driven by improved sales of agribusiness and dairy products. However, declining commodity milk prices continued to put pressure on milk trading.

The company announced that it would pay an interim dividend of six cent, an increase of 9 per cent from last year.

While chairman Geoffrey Vance stressed that Donegal Creameries "remains committed to its dairy and agribusiness", and is "confident of developing its model further to position it for the changes ahead", he also noted that the group would continue to develop its "extensive property portfolio".

"The group will be acquiring selective property assets which will either enhance or create value-adding opportunities going forward," according to Mr Vance.

Mr Hanlon said the company was adapting its property development strategy from "ad hoc sales of sites" to relatively larger transactions.

While no further disposals are planned for the second half of 2006, the company intends to acquire significant property assets before the end of the year.

Mr Hanlon said that the company will continue to make "at least one sizeable [ property] transaction per year". The company has applied for planning permission to redevelop its Letterkenny headquarters, which includes an "extensive site", Mr Hanlon said.

A retail office and creche facility will be developed on this site.

But he predicted that it would be 2008 before any significant activity will occur there.

Mr Vance said Donegal Creameries would also continue "to evaluate selective growth opportunities outside of agribusiness and property".