Steady First Half Performance by Dairy Crest
Dairy Crest has reported a 2% fall in revenue to £672.2 million, reflecting lower spreads and milk volumes, for the six months ended 30 September 2013. Group pre-exceptional profit from continuing operations fell 7% to £27.0 million. However, group adjusted profit before tax (before exceptional items, amortisation of acquired intangibles and pension interest) was £21.9 million, up 18% versus £18.6 million in 2012.
In line with its well-established strategy, the UK dairy group continues to focus on growing added value sales and reducing its cost base. In aggregate, sales of its four key brands (CathedralCity, Country Life, Clover and FRijj) were up 1% despite trading against tough comparatives last year when sales were up 11%.
Dairy Crest’s cost reduction programme remains ahead of target and the group has made good progress to improve efficiency across the business during the first half. Dairy Crest anticipates that cost reduction projects initiated this year will deliver annual benefits ahead of its £20 million target.
Cheese revenues and profits increased compared to the same period last year. However, Dairy Crest encountered more difficult in its Butters and Spreads business.
Dairy Crest made solid progress in its Dairies division during the first half and remains committed to improve profits with a medium-term target of 3% return on sales. The key drivers are cutting costs, growing FRijj sales and maximising the profits from the sale of redundant properties. Dairy Crest needs these to more than offset higher farmgate milk prices and declining doorstep sales.
Dairy Crest is investing around £45 million to manufacture demineralised whey powder, a base ingredient for baby food – a fast growing global market. Dairy Crest expects production to start in the first half of 2015 and that the project will have a five year cash payback and enhance annual operating profits by over £5 million.
Mark Allen, chief executive of Dairy Crest, comments: “Dairy Crest has had a steady first half. Despite the challenging environment we have continued to grow our key brands through innovation and reduce our cost base. We have committed to an exciting whey project which will increase future profits and widen our customer base. This is a significant move for Dairy Crest which demonstrates our focus on growing the business in added value markets. We remain confident that full year performance will be in line with our expectations.”
