Dairy Crest sees "challenging" spreads market

Dairy Crest sees "challenging" spreads market

Dairy Crest has booked an increase in first-half profit before tax, despite lower operating profit and sales softness.

The company said today (7 November) that adjusted pre-tax profit rose 18% to GBP21.9m (US$35.2m). Gains were driven by lower interest expenses, due to a reduction in net debt, and annual cost savings "ahead" of the groups GBP20m target.

However, sales dipped 2% and operating profit was down 6% to GBP27.3m.

The group's spreads business continued to struggle in a "difficult" market. The performance of the unit weakened year-on-year, with sales down 12% and profit down 39%.

Dairy Crest emphasised that sales of its four key brands, including Cathedral City and Clover, rebounded in the second quarter despite a tough comparison against last year, when sales gained 11%. During the first quarter, sales had fallen 4% but were up 1% year-on-year for the half, the company revealed.

Cheese saw a strong divisional performance, driven by Cathedral City which booked a 9% sales gain. Dairy Crest was also upbeat on its ongoing efforts to improve dairies profitability: profit was up 37% to GBP2.6m, including property disposals of GBP2.5m.

Dairy Crest added that it is making progress on its plan to begin manufacturing demineralised whey powder, a base ingredient for baby food. Production is expected to get under way in the first half of 2015.

"We have committed to an exciting whey project which will increase future profits and widen our customer base. This is a significant move for Dairy Crest which demonstrates our focus on growing the business in added value markets," CEO Mark Allen commented. 

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Steady first half performance in challenging trading environment 

- Four key brands together deliver sales growth 

- Annual cost savings ahead of £20 million target 

- Interest savings as expected 

- Interim dividend up 3.5% 

- Whey project underway 

 Mark Allen, Chief Executive, said: 

“Dairy Crest has had a steady first half. Despite the challenging environment we have continued to grow our key brands through innovation and reduce our cost base. 

We have committed to an exciting whey project which will increase future profits and widen our customer base. This is a significant move for Dairy Crest which demonstrates our focus on growing the business in added value markets. We remain confident that full year performance will be in line with our expectations.” 

Original source: Dairy Crest