FDBusiness.com

According to Dairy Crest’s Interim Management Statement for the nine months ended 31 December 2012, the company continues to cope well in a challenging environment and overall trading remains in line with its expectations.

The company said that it remains focused on growing added value sales and improving efficiency across the business, and noted that its four key brands continue to grow, aided by good performances from the innovative new products launched in recent years.

Dairy Crest said that it remains on track to exceed its annual cost savings target by delivering savings of around £23 million this year, having already identified several meaningful projects for next year that should enable it to maintain its track record in this area.

The sale of St Hubert has significantly strengthened Dairy Crest’s financial position, according to the company, and has provided a strong foundation for the future; its aim in deploying the cash from the transaction is to make targeted acquisitions. The company said that it is determined that any acquisition must deliver strong returns for shareholders but, to date, it has not identified any such acquisition. Its short-term focus is on improving its debt structure in order to reduce future interest costs, improve earnings and underpin the dividend.

Taken together, Dairy Crest noted that its four key brands (Cathedral City, Country Life, Clover and FRijj) continue to grow, with sales volumes up by 4% and sales values by 5% over the nine month period. As expected, this represents a slowdown from the double digit increases seen in the first six months of the year, given the tougher comparatives the company says it has been trading against in the third quarter. While it also faces strong comparatives in its fourth quarter, it still anticipates mid-single digit volume and value sales growth for the year as a whole. In its Dairies business it has continued with initiatives designed to restore profitability to its medium-term target of 3% on sales.

This year has been a tough one for dairy farmers with poor weather and high animal feed costs making production difficult and expensive, the company said. With the support of its customers, Dairy Crest said that it has paid more to its farmers to help them overcome the challenges they have faced, and to encourage them to continue to provide it with high quality British milk. From 1 April 2013 Dairy Crest expects to introduce a new formula-based pricing structure for some of its milk purchases, linking future milk prices to on-farm costs and market returns.