Dairy Crest set to profit from spreads
The plummeting UK spreads market had driven down Country Life and Clover sales and aggregate sales of those brands plus Cathedral City and flavoured milk drink Frijj had been flat, Dairy Crest reported.
But Shirley forecast that full-year profit generated from spreads would rocket by £26M to £30.5M, fuelled by plunging cream prices and cost savings from the closure of Dairy Crest’s Crudgington factory.
Dairy Crest took a hit to its cheese profits, but reported progress on the sale of its loss-making dairies division to Müller UK & Ireland in its interim management statement.
‘Lower cream prices’
“Lower cream prices have benefitted spreads profits,” stated the maker of Clover and Country Life, commenting on its performance in its third financial quarter (Q3).
“However, reduced whey realisations in particular and some reduced selling prices on the back of lower input costs have adversely affected cheese profits.”
Shirley said he believed retailers were pressing Dairy Crest to cut cheese prices, motivated by the sharp fall in milk prices over the past year.
Despite this, the company reported its spreads and cheese divisions “performed robustly” in its Q3, with core cheese brand Cathedral City growing market share.
‘Significantly lower’ debt
Commenting on the firm’s expectations that it would “significantly lower” year-end net debt in comparison with half-year figures, Shirley predicted debt could be slashed by as much as £10M.
Dairy Crest said its investment in new demineralised whey and galactooligosaccharide facilities was on track and production would start towards the end of the summer.
Shirley welcomed confirmation of shareholder approval for the disposal of its dairies to Müller UK & Ireland for £80M. “We see the greater prize for investors as clearance of the dairies disposal which our analysis suggests would result in a much higher-quality branded fast moving consumer goods group,” he said.
The deal remains subject to regulatory clearance by competition authorities.
In addition to the results, Dairy Crest announced the departure of executive md Martyn Wilks, who would be replaced by group commercial director Adam Braithwaite.
“Against the background that we operate in, Dairy Crest has delivered a solid performance,” said ceo Mark Allen. “Maintaining the sales of our four key brands in line with last year and growing our overall cheese and spreads profits is a good result in today’s challenging environment.”
