Dairy Crest upbeat on cheese, spreads performance

Dairy Crest upbeat on cheese, spreads performance

Dairy Crest has hailed an improved full-year performance from its spreads business but profits fell at the UK dairy group as one-time costs and ongoing weakness in its dairies division took their toll.

The company said today (21 May) net profit for the year to 31 March declined to GBP20.5m (US$32.1m) versus GBP50.2m in 2014. Excluding exceptional items, profit remained unchanged from a year earlier.

Operating profit was also hit by one-time costs, falling to GBP32m from GBP64.3m. Pre-tax exceptional charges in the year totalled GBP36.3m and included costs associated with spreads manufacturing consolidation and investments in establishing a demineralised whey plant.

Dairy Crest flagged an improved performance from its spreads and cheese unit, where operating profit rose 19%. CEO Mark Allen stressed: "We have grown combined cheese and spreads sales despite the deflationary market environment. We have also delivered an encouraging improvement in the combined margin of these businesses."

Dairy Crest's struggling dairies business - which sells liquid milk - reported a 90% decrease in operating profit. Management insisted it remains on-track to gain regulatory approval to sell the unit to Muller Wiseman Dairies, a disposal that is viewed by the market as a positive step for Dairy Crest.

Shore Capital analyst Darren Shirley said the performance of spreads and cheese beat expectations but that the dairies performance came in significantly below the broker's forecasts. "Management has again reiterated its expectation that the proposed disposal of its dairies activities will gain regulatory approval - it already has shareholder approval - though the process could well take another 6 months to clear, placing ongoing uncertainty around the stock for some time," he noted.

Overall, Dairy Crest group sales dropped 4% in the period to GBP1.33bn.