Dairy Crest makes progress

15 Feb 2017

Dairy Crest has issued an Interim Management Statement for the nine months ended 31 December 2016. The company said that the outlook for the full year remains in line with its expectations.

Dairy Crest makes progress

Dairy Crest has issued an Interim Management Statement for the nine months ended 31 December 2016.

The company said that the outlook for the full year remains in line with its expectations.

Key brands have continued to perform well, Dairy Crest said. Clover, Frylight and Country Life have all grown volumes in the first nine months of the year and are said to have taken significant share in their respective markets. As predicted, Cathedral City performance improved in the third quarter.

Overall, in the first nine months of the year the combined volumes of Cathedral City, Country Life, Clover and Frylight are in line with the same period last year.

Clover and Frylight have both seen new packaging launches during the quarter and Frylight has been supported by a new TV advertising campaign over the last six weeks. In January 2017, Dairy Crest notes that Clover won the spreads category “Product of the Year 2017” award in the world’s largest consumer survey award for product innovation - a testimony, it says, to the work undertaken to remove artificial ingredients from Clover. Furthermore, in October 2016 Frylight won the Institute of Grocery and Distribution Health and Wellness award. Dairy Crest says it will continue to invest in innovation and marketing across key brands through 2017.

Production of demineralised whey powder and galacto-oligosaccharide (“GOS”), both ingredients for the growing global infant formula market, continues to develop well at the factory in Davidstow, the company reports, noting that there have been significant improvements in the percentage level of demineralised whey hitting the important infant formula grade. Dairy Crest says it remains confident that this will continue to rise and that it will hit its target of over 80% by 31 March 2017.

On 21 December 2016, Dairy Crest announced that it had entered into a research partnership with Danisco Animal Nutrition, part of DuPont, to further explore the potential uses of GOS in poultry and swine. If successful, the company believes this work would help to broaden the potential market for GOS beyond infant formula.

Dairy Crest notes that it has seen further milk cost inflation since the half year and has now announced increases in the price paid to farmers of 8.28 pence per litre since June 2016. This represents an increase of 38%. Furthermore, market prices for cream have remained high after more than doubling in the first half of the year. The cream price determines the input costs for Dairy Crest’s butter business. These movements inevitably result in a short-term working capital outflow and, the company said and, as a result, it now expects year end net debt to be somewhat higher than 31 March 2016.

“The outlook for the full year remains in line with our expectations,” said Mark Allen, Chief Executive of Dairy Crest. “The business has continued to make progress during the quarter. Our brands have performed well supported by successful innovation and brand investment. I’m particularly pleased to see the improvement in Cathedral City’s performance.”

“At the new Davidstow functional ingredients facility we are seeing significant improvement in the percentage level of demineralised whey meeting infant formula grade. This is important in maximising future opportunities in this market.

The announcement of the partnership with Danisco Animal Nutrition marks a further significant step in the development of GOS beyond infant formula. This has exciting potential opportunities for the future.”