15th Jul 2014 08:55
LONDON (Alliance News) - Dairy Crest Group PLC saw its shares fall Tuesday after it said most of its key brands performed well in the first quarter, but sales of its margarine brand Clover continued to slump, hit by a difficult spreads and butter market in the UK.
The dairy food company said its four key brands - Cathedral City, Clover, Country Life and FRijj - collectively grew by 4% in the quarter ended June 30. However, while Cathedral City, Country Life and FRijj each grew sales by more than 5%, the Clover brand continued to see a fall in sales in a difficult spreads market, it said.
Dairy Crest shares were the second biggest faller in the FTSE 250 Tuesday morning, down 2.8% at 426.20 pence.
"We expect Clover's future performance to benefit from the forthcoming television advertising campaign. We are also on track to meet our cost reduction targets, which together with our projects to benefit from the increasing global demand for infant formula will underpin future growth," said Chief Executive Mark Allen in a statement.
"Despite the continuing challenging market conditions our full-year expectations remain unchanged," he added.
Cathedral City cheese continues to grow strongly boosted by product innovation and new launches, while FRijj milkshakes are growing well in the ready-to-drink flavoured milk market, boosted by better shelf space in supermarkets.
Dairy Crest said profits in its dairy products group remained under pressure in the first half of the year due to high milk purchase prices. However, it said it has now reduced the price it pays for milk, and profits in the product group will be second-half weighted. It said property profits from depot disposals also will make up a larger part of total profits than originally expected.
"We now anticipate full year profits from sales of redundant distribution depots will be in the range GBP10 million to GBP15 million," the company said.
The company said it is on target to reduced its costs by GBP20 million this year, mostly in its dairy products business, as it continues to reduce distribution costs.
It said it also remains on target to complete the rationalisation of its spreads and butter manufacturing facilities and close its Crudgington site in Shropshire this year.
The company said its financial position at the end of the first quarter remains in line with its expectations, and its outlook for the full year remains unchanged.
Earlier this month, Dairy Crest said it had entered into a joint venture with UK-based Fayrefield Foods Ltd and a strategic partnership with dairy exporter Fonterra, to market and sell two new products aimed at the infant formula market.
The company is currently embarking on a major project to add value to the whey it produces, as a by-product of cheese manufacturing. Whey powder is a base ingredient used in formula for babies and infants.
Dairy Crest is investing a total of GBP45 million in its cheese making factory at Davidstow in Cornwall to allow it to manufacture de-mineralised whey powder, which it said remains on track, and is also planning a new GBP20 million capital investment at its Davidstow site to manufacture GOS, a lactose-based prebiotic widely used in infant formula.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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