Dairy Crest reported aggregate sales of its four key brands up by 4% in a result described by City analyst Shore Capital, as a “strong branded performance”. Sales of Cathedral City grew by 6%, Country Life by 16% and Frijj by 8% but sales of Clover were down by 9%, which management blamed on the tough spreads market.
The firm said Clover sales would benefit from TV advertising in the second quarter. It also reported rationalisation of its spreads and butter manufacturing facilities were on track, with the closure of the Cruddington site this year.
Dairy Crest’s three-point plan to improve profits included: growing the sales of Frijj in the ready to drink flavoured milk market, cut costs by £20m this year, with its dairies division benefiting most, and maximise the sale of surplus properties.
The firm confirmed the sale of its redundant Surbiton depot in Surrey for £4.9M and valued sales of this and other depots will total between £10-15M this year.
But its dairies group profits remained under pressure as the firm chose to maintain high milk purchase prices during the quarter despite lower cream revenues.
Dairy Crest added that its £45M investment to manufacture demineralised whey at Davidstow remained on track. “We are working closely with our partner Fronterra to maximise the potential returns from this investment and the newly announced £20M investment to manufacture galacto-oligosaocharide.
Shore Capital left is current pre-tax profit for the group unchanged at £65.1M, with earnings per share of 38.7p. The analyst retained its ‘hold’ advice on Dairy Crest stock.
Meanwhile, Carr's Milling said its UK position had been strengthened through its acquisition of Lancashire-based compound feed and retail specialist Merit (Feeds & Storage) Limited. After the acquisition was completed on April 30, the business has now been consolidated into the Lancaster Mill and the enlarged Brock branch.
The firm added that its Country store refurbishment programme of the past 12 months had resulted in significant improvements and increased efficiencies.
Food safety and hygiene standards remained a key concern for customers and the firm was continuing to invest to maintain flour milling efficiency, it said.
While the forthcoming UK harvest is expected to be large, its quality remains unknown.
In its engineering division, Chirton Engineering, acquired in April, had been integrated into the business. The full benefits of the acquisition are expected to be realised in the next financial year.
Reflecting the acquisition and capital spending, net debt at the end of May was £27.1M, up from £25.3M at the beginning of March. The renewal of the group's UK banking facilities has been completed, with committed undrawn facilities totalling £16.4M.
Tim Davies, chief executive, said: “Our geographic diversity and continued investment has ensured that we are at the forefront of innovation, technology and design. This has resulted in a strong performance across every division during the period. As such, we expect the full year performance to be in line with our existing expectations.”
The firm will post preliminary results for the year ending August 30 on November 10.