Dairy Crest “well positioned”24 Sep 2015
Dairy Crest has issued a trading update for the six months ending 30 September 2015, ahead of announcing its Interim Results on 5 November 2015. In the first quarter, total sales of the company’s four key brands – Cathedral City, Clover, Country Life and Frylight – were in line with the first quarter of last […]
In the first quarter, total sales of the company’s four key brands – Cathedral City, Clover, Country Life and Frylight – were in line with the first quarter of last year and the company expects to report a similar position for the first half.
Cathedral City, the largest of the four, and Frylight have continued to perform strongly, growing sales and market share during the period. Clover and Country Life sales have fallen in a butter and spreads market that the company says remains challenging. Dairy Crest recently introduced a new recipe for Clover to meet changing consumer preferences. It is now made with no artificial ingredients, and Dairy Crest expects this innovation along with a supporting media programme to improve the performance of Clover in the second half.
As previously reported, Dairy Crest anticipates that the performance of its Cheese and Spreads and butters businesses will be weighted to the second half of the year ending 31 March 2016 and that first half profits in these businesses will be behind those of the first half of last year. Dairy commodity markets have been deflationary during the first half and as a result, Dairy Crest’s input costs have fallen. On average, cheese is matured for around a year and therefore lower milk purchase prices will only be fully reflected in the cost of cheese sold in the second half of this year. Dairy Crest said it continues to focus on its cost base and to drive efficiencies across the business.
Expectations for the full year remain unchanged. This reflects lower cheese costs and an improved performance from the Spreads and butters business in the second half.
The investment at Dairy Crest’s Davidstow creamery to manufacture demineralised whey powder and GOS is nearing completion. This is another important stage of Dairy Crest’s clear growth strategy, the company said, noting that these added value products give Dairy Crest access to new sales channels in fast growing global markets and are principally ingredients for infant formula, although the company is also exploring additional applications for GOS. Production commissioning is underway and Dairy Crest expects to start selling both these products in this financial year and receive a full-year benefit in the year ending 31 March 2017.
“The first half of the year has played out largely as we expected,” said Mark Allen, Chief Executive. “Cathedral City continues to go from strength to strength and has again grown sales and market share. The strong performance of Cathedral City and of Frylight is particularly encouraging in markets that remain challenging. Our cost base remains firmly under control.”
“Lower cheese costs and an expected improved performance from our Spreads and butters business in the second half mean that our full year expectations remain unchanged. Our investment to manufacture demineralised whey powder and GOS is almost complete and we look forward to accessing new sales channels in fast growing global markets in the second half of the year.”
“We have always believed the sale of our Dairies operations is good news for the whole UK dairy sector which is currently facing significant challenges arising from low dairy commodity returns. It will deliver economies of scale and cost efficiencies that will underpin investment and help the UK compete more successfully in global markets.”
“We still expect to complete the sale in 2015 following the CMA’s indication in August that it was in favour of Müller’s undertakings and are hoping for positive news in the near future. In the meantime we continue to do everything we can to support our farmers who are facing a particularly tough time at present.”
“Dairy Crest is well positioned for long term profitable and sustainable growth with strong accompanying cash generation.”
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