Dairy Crest plans to close two dairies in a bid to reduce costs and sustain profitability at its liquid milk business, putting more than 400 jobs at risk. 

The UK's largest dairy processor today (17 April) insisted the move to close facilities in Aintree and Fenstanton was part of a strategy to reduce costs at its liquid milk business, which is operating in an "extremely challenging market environment". 

"The proposals we are announcing today are part of a series of actions designed to restore our dairies business to an acceptable level of profitability over the medium term," said CEO Mark Allen. 

Dairy Crest anticipates there to be an exceptional costs of GBP15m (US$23.9m) associated with these closures. These will be charged in the 2012-2013 fiscal year, the company revealed.

Responding to the news, Unite, the union representing Dairy Crest workers, confirmed that it has entered the mandatory 90-day worker consultation process with the company. 

Describing the news as a "massive blow" Unite national officer Cath Speight said that the move had put more than 400 jobs at risk. 

"We hope Dairy Crest's management will rethink this decision and we urge them to offer the staff affected every opportunity for redeployment within the business," Speight said.

Meanwhile, Dairy Crest also announced that UK retailer Tesco does not plan to renew a current contract with the compay for the supply of liquid milk. The Tesco supply deal comes to an end in July and accounted for 3% of Dairy Crest's liquid milk sales last year. 

"The loss of this contract does not change the group's wider and important relationship with Tesco across key UK brands Cathedral City, Country Life, Clover and Frijj and will not impact Dairy Crest's profit expectations for the year ending March 31st 2013," the company said. 

Dairy Crest added that stronger-than-anticipated cash collection meant net debt at 31 March will be around 5% lower than market expectations.