Country Life butter hit hard in Dairy Crest results

By Rod Addy

- Last updated on GMT

Related tags Dairy crest Milk

Allen: ‘steady first half’
Allen: ‘steady first half’
Dairy Crest’s spreads business was hit by fewer butter promotions and higher cream costs, dragging down overall sales, the manufacturer reported in its first half financial figures.

“Spreads profits are down in a butters and spreads market that remains difficult​,” stated the company in its interim statement. “Demand has fallen across the category and higher cream prices have adversely impacted costs.”

In particular, Country Life block butter sales fell significantly in the six months to September 30, mainly as a result of fewer promotions, the company reported. Sales of the overall brand were 17% down over the same period last year, it said.

And Utterly Butterly had been a casualty of retailers cutting back on space allocated to butters and spreads in stores, said the firm.

Investec analyst Nicola Mallard said pre-tax profit for the first half of the year had been “a shade better than our forecast of £21M”​. She expected pre-tax profit for the second half of the year to be even better.

Sales of Dairy Crest’s Frijj flavoured milk drink had fallen as a result of scaling back on promotions, although this strategy was only temporary as the business increased production for the brand.

New production line

“Sales fell 17% in the period but we expect that second half performance will improve following the commissioning of a new production line and that the brand will be in growth for the year as a whole,”​ the company stated.

“The second half has started well with sales significantly up in October 2013 compared to October 2012.”

Its Cathedral City cheese brand turned in a sterling performance, with sales up 9%, supported by new product launches.

Dairy Crest expected previously announced cost reduction projects to deliver more than the £20M originally estimated.

However, it said it expected to take a £6.8M hit from restructuring costs incurred by the continued rationalisation of its butters and spreads business at the end of the year. This included previously revealed plans to close its Crudgington site in 2014.

Boost operating profits

Commenting on its plans to invest £45M in demineralised whey powder production, the firm said it expected production to begin in the first half of 2015. The project would deliver return on investment within five years and boost operating profits by more than £5M, it added.

Dairy Crest said it had continued to increase the price it paid milk suppliers, helped by being able to negotiate cream price increases and pass raw material costs on to customers.

Total sales for the half year fell by 2%, from £688.2M in the same period in 2012 to £672.2M. However, adjusted pre-tax profit rose by 18%, from £18.6M to £21.9M.

“Dairy Crest has had a steady first half,” said ceo Mark Allen. “Despite the challenging environment we have continued to grow our key brands through innovation and reduce our cost base.”

Related topics Dairy Dairy-based ingredients

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