UK: Dairy Crest sees sales growth slow

Dairy Crest said today (3 February) the company's expectations for its fiscal year were unchanged since its November profit warning after seeing sales growth slow during its third quarter.

The UK dairy group, which said in November that annual profits would fall by around 10%, this morning reported a 4% rise in group sales for the nine months to 31 December.

During the first half of Dairy Crest's fiscal year, revenue rose 6% to GBP808.2m (US$1.1bn).

Dairy Crest said sales of branded dairy products and retail milk had grown "strongly" but had been offset by lower ingredients volumes, a fall in doorstep sales and a dip in cheese volumes following the sale of its Stilton and speciality cheese business last August.

Sales of Cathedral City cheese jumped 14% during the third quarter, while Country Life butter enjoyed "double-digit" growth.

In all, Dairy Crest said sales from its food division grew by 4% during the first nine months of its fiscal year. "This reflects the continued excellent performance of our key brands," Dairy Crest said.

Revenue from the company's dairies division was up 4% during the none-month period. The group said third-quarter milk volumes from its retail liquid business rose 5%.

However, milk sales to doorstep customers continued to fall, while the company said markets for dairy ingredients remained "challenging". Dairy Crest blamed an "unprecedented difference" between farm-gate milk prices and commodity realisations for weighing on profits.

The company has introduced price cuts to alleviate the impact on earnings.

Chief executive Mark Allen said: "Profits in our Dairies business have been impacted over the past year because commodity returns have been far below farm-gate milk prices. However, the lower raw milk costs we are now seeing will help to rectify this position going forward."

Allen added: "We have traded in line with our expectations...  Our strategy of investing in marketing has enabled our key brands to continue with their strong performance."