Dairy Crest has taken steps to decrease risk in its pension scheme and reduce the impact of foreign exchange on its debt.

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The UK’s largest dairy processor said today (17 December) that it had bought a GBP150m (US$231.6m) bulk annuity policy from Legal & General.


The policy will insure around half Dairy Crest’s liability for pensions in payment. As of the end of September, the pension fund had total liabilities of GBP658m.


Dairy Crest has also changed EUR200m of euro-denominated debt into sterling-denominated debt.


The company said the move, which leaves a balance of EUR170m denominated in euros, brings its debt structure “more in line” with the geographic split of its operating profit. Dairy Crest generates around 25% of its operating profit in Ireland and France.

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The company expects its net debt to stand at GBP500m by the end of March next year, assuming there are no changes in the sterling/euro exchange rate.


Finance director Alastair Murray said: “Reducing risk, and more specifically exposure to financial markets, is a priority for the group given current levels of volatility. The two initiatives being announced today are an important step in achieving this aim.”


Neither of the moves will have a material effect on current-year earnings, the company said.