Dairy Crest today (6 November) reported a drop in half-year profits due in part to losses from its dairies arm – a business it has agreed to sell to German giant Müller.

The UK dairy group booked adjusted pre-tax profits of GBP21.3m (US$34m) for the six months to 30 September, down 3% on the year.

Dairy Crest’s dairies business – which includes private-label milk supplies, doorstep delivery and the Frijj brand – generated an operating loss of GBP4.4m, compared to profit of GBP2.6m a year ago. That came despite a 1.5% increase in revenue to GBP466.8m.

The company’s cheese arm also saw profits fall as higher costs offset increased revenue. Sales of Cathedral City cheese rose 2%.

Within its dairies business, Dairy Crest said Frijj had enjoyed “strong growth”. However, the group said lower cream realisations and a “significant divergence” between cream revenues and farmgate milk prices led to the division’s loss.

It did, however, forecast a “stronger second half” for the business, on which it has struck a deal to sell to Müller for GBP80m, pending competition approval.

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Dairy Crest’s spreads profits grew despite lower sales as the division benefited from falling input costs. Sales of Country Life butter rose 4%, although Clover sales dropped 12%. Dairy Crest pointed to consumers’ “increasing preference” for butter. That said, both brands increased their share of their respective categories.

Group revenue climbed 1% to GBP682.1m on the back of the increased sales from its cheese and dairies units.

On a reported basis, which included one-off items such as costs from recent restructuring measures, Dairy Crest’s pre-tax profits were GBP900,000, down sharply from GBP19.7m a year earlier.

Shares in Dairy Crest were up 10.26% at 470p, as the market welcomed the proposed deal with Müller.

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