Dairy Crest said today (30 September) that first-half trading was in line with expectations despite increasingly difficult economic conditions and rising input costs.

"Our markets have become more difficult with general economic conditions worsening and upward pressure on input costs, notably raw milk, vegetable oils, packaging, energy and fuel," the group said in a trading update.

Despite the worsening trading environment, the company said that it achieved double-digit sales growth by volume and value of its core brands Utterly Butterly, Clover and Country Life.

While Dairy Crest said its food unit saw "solid growth" during the six-month period, the company warned that its dairies division was expected to be "well down" on the first half of last year.

The company's milk retail business has continued to make solid progress developing long-term relationships with retail customers, Dairy Crest said.

In order to counter the negative impact of increasingly difficult trading conditions the group said it would reduce its cost base and increase prices.

As part of its cost reduction plan, the company said it would reorganise its head office and other support functions. Dairy Crest also said it was mulling the closure of its Nottingham dairy. If it were to go ahead with this plan, Dairy Crest would face an exceptional charge of about GBP8m (US$14.5m).

"These efforts will assist the group in meeting the challenging market conditions expected in second half," the company said.

Net debt at the end of the half is expected to be broadly in line with expectations, the company added. Dairy Crest has agreed a new five-year revolving credit facility of GBP85m and EUR175m (US$251.5m).