Dairy Crest 'must raise its game' after a 'difficult' year

By Rick Pendrous

- Last updated on GMT

Dairy Crest has reported a "continuing difficult trading environment", particularly for its Dairies Division, for the first half of the financial year (H1). This has led analysts to call for an improvement in its performance in the second half to meet market expectations.

However, Shore Capital analysts Dr Clive Black and Darren Shirley praised Dairy Crest's management's initiatives to reduce the group's cost base and raise productivity. Action was not just taking place within the Dairy Division, where margins had recently been squeezed, but also in its spreads activity, through the concentration of production at its Kirby plant on Merseyside.

Dairy Crest reported adjusted profit before tax of £19.1M for H2 ended September 30, compared with £22.9M for the same period of the previous year on sales of £688.2M (£739.1M). Half-year net debt was £75.8M, compared with £365.3M in 2011.

'Much stronger'

Dairy Crest chief executive Mark Allen said: "The decisive actions we have taken during the period leave us well placed as we move forward.

"The sale of St Hubert has created a more focused business and a much stronger balance sheet. We now have the ability to make UK acquisitions, but we will take time to ensure any transaction creates value for our shareholders.

"Despite the challenging environment we have continued to grow our key brands. We have reduced our cost base and made improvements to our Dairies business. We expect this to benefit future profitability.

"We remain confident that full- year performance will be in line with our expectations."

'Brighter financial returns'

In a statement, Black and Shirley said: "Improvement in Dairies profitability, where a return on sales of about 3% is targeted, alongside more competitive Spreads capability plus progress in the performance of core branded activities most notably Cathedral City make for potentially brighter financial returns from Dairy Crest."

They also said that the proceeds from the £348M sale of its St Hubert business would help Dairy Crest to have a "more robust constitution".

Related topics: Business News, Dairy-based ingredients

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