Combined value growth of these brands was expected to be higher than volume growth, said Dairy Crest. Cathedral City was expected to deliver double-digit volume growth in the first half. Clover and Frylight also continued to see strong volume growth.
However, higher cream prices had raised input costs for Dairy Crest’s butter business. This resulted in reduced promotional activity on Country Life and impacted sales volumes.
Impacted sales volumes
Dairy Crest expected its profit for the half-year to be ahead of the same period last year, with its expectations for the full year remaining the same.
It anticipated net debt at the half year would be higher than at the year-end in March 2017, as the first half is characterised by increased stock levels due to the seasonality of milk supply and the payment of the final dividend.
Chief executive Mark Allen commented: “Cathedral City has had a strong first half of the year, delivering good volume and value growth and strengthening its position as the nation’s favourite cheese. This performance has more than offset the impact of further input cost inflation in the butter business.
‘Input costs remaining high’
“Our profit expectations for the full year are unchanged despite input costs remaining high. The strength of our brands and focus on quality, innovation and efficiencies mean that we remain well positioned to deal with market conditions.”
Commenting on Dairy Crest’s results, Shore Capital analyst Darren Shirley said the company was positioned for long-term growth. See his full comments in the box below.
Meanwhile, Dairy Crest will issue its interim results on November 9 2017.
Dairy Crest’s trading update – what the analyst said
Shore Capital analyst Darren Shirley said: “Dairy Crest’s robust and encouraging trading update confirms combined volume growth across its four key brands, ‘good progress’ developing a customer base for demineralised whey [DMW] and galacto-oligosaccharide [GOS], profit growth over the period ‘despite input cost remaining high’ and unchanged expectations for the full-year.
“We view Dairy Crest as an attractive combination of leading UK consumer brands, which also provides access to international growth in the infant formula through DMW and the exciting gut health and nutritional benefits of GOS.”