FDBusiness.com

Dairy Crest is planning a further £20m cost reduction programme for its next financial year to help offset increasing input costs. The UK dairy group’s cost reduction programme in its last financial year ended March 31st 2011 delivered annual savings ahead of the £20 million target set at the start of the year.

Input costs have increased steadily during the past year and Dairy Crest is forecasting that this trend will continue. However, the group says that it is making satisfactory progress in recovering the balance of currently envisaged higher costs from customers.

In its pre-close update, Dairy Crest reports that trading in its fourth quarter has remained strong and profit before tax for the year ending March 31st 2011 remains in line with expectations. The group is continuing to benefit from being a broadly based business, with a strong performance from the cheese business compensating for more challenging trading in Dairy Crest’s spreads and dairies businesses.

Dairy Crest’s strategy is to grow sales of its brands and other added value products, control costs and generate cash. All five of its key brands increased sales during the year.

Dairy Crest also sold more milk to the major supermarkets and won an important contract to supply Tesco during the last financial year. However, Dairy Crest was unable to agree a suitable milk price with the Co-operative Group and its fresh milk supply contract to the retailer will end in August 2011.

“This has been a year of strong progress for Dairy Crest in which we have consistently delivered on our strategy despite challenging trading conditions. We are well positioned with strong brands, tight cost control and an efficient supply chain,” says Mark Allen (pictured), chief executive of Dairy Crest. Dairy Crest will announce its preliminary results for the year ending March 2011 on May 19th 2011.