Job losses and investment go hand in hand at UK dairy firm

Sixty jobs are to be axed at UK dairy giant Arla Foods following a major restructuring move last month.

The jobs, mainly senior and middle management positions, will go over the next three months as a result of the company’s move to a new, simpler, two division structure - operations and commercial.

In September this year the company warned that job losses might be on the cards as a cost-cutting drive to offset spiralling distribution and packaging costs resulting from rising oil prices.

Chief executive Tim Smith has now confirmed the company’s plans to offset “record levels of cost inflation” during the 2005 financial year by increasing milk prices by around 1½ pence a litre. He is currently in talks with Arla’s retail customers to secure these increases.

Despite these problems, Arla is investing heavily at several of its sites. A new £18m dairy at Lockerbie is due to begin production this month, producing Scottish milk for the central belt. Phase two of its Stourton dairy in Leeds has also been completed, bringing total capital outlay on the site to £75m with a throughput of over 450ml/year.

Further investments worth £10m were made in 2005 at the Ashby, Oakthorpe, Hatfield and Manchester dairies. However, as part of its integration programme, the now scaled back Newcastle site will close in 2006 once the Lockerbie plant comes fully on stream - a move which has already saved the company £20m.

The company posted sales from continuing operations of £1.32bn in the year to September 30, a rise of 4.6% compared to the same period last year.

Despite a profits warning in August, pre-tax profit was also up at £14.7m for 12 months up to September 30 2005 compared with £1.9m in the 18 months to September 2004. Profit before amortisation and exceptional items was up from £43.2m to £44.5m.