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.
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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.
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.
