5th Feb 2015 08:05
LONDON (Alliance News) - Dairy food products business Dairy Crest Group PLC Thursday said its cheese and spreads business continued to perform "robustly" in the first nine months of its financial year, while its dairies business continued to make losses
In a trading update, the group said sales of its four key brands - Cathedral City cheese, FRijj milkshake, and Country Life and Clover spreads - were flat over the nine months to end-December compared with the previous year, as growth in some brands were offset by others.
"Cathedral City, significantly the UK's leading cheddar brand, has continued to grow its market share and FRijj has performed strongly. However their growth has been offset by lower Clover and Country Life sales," the company said in the statement.
"The performance of our Dairies business reflects the difficulties facing the whole UK dairy sector," Chief Executive Mark Allen added in the statement.
Back in November, Dairy Crest said it had agreed a deal to sell its dairy operations to Müller UK & Ireland Group for GBP80 million in cash, leaving it focused on its spreads and cheeses, such as Cathedral City and Country Life, as well as whey products for infant formula.
The group said Thursday that the sale of its Dairies operations is progressing to plan, having received the approval of Dairy Crest shareholders, although the deal still remains conditional on the approval of the relevant competition authorities.
"Against the background that we operate in, Dairy Crest has delivered a solid performance. Maintaining the sales of our four key brands in line with last year and growing our overall cheese and spreads profits is a good result in today's challenging environment. We continue to strengthen these businesses and are investing for future growth," said Allen.
Last month, Dairy Crest announced that it has retained its contract to supply fresh milk to Wm Morrison Supermarkets PLC for a further three years, although it will supply about a third less milk than it had been supplying to the grocer previously.
Dairy Crest said it does not expect the volume decline to "materially affect" its financial results for the current financial year ending March 31, 2015. However, the volume decline only comes into effect in March.
Dairy Crest said it also will continue to supply Morrisons with cheese, flavoured milk, butter and spreads.
The news came as UK milk prices have falling sharply in recent months, largely due to factors outside the UK. In particular, Russia's ban on EU dairy products has cut EU milk exports to that country by billions of litres, pressuring milk prices across the bloc. UK dairy farmers, facing sharply lower revenue, have been holding protests in a bid to force supermarkets to pay more for milk.
"We continue to expect the second half performance of our Dairies business to be better than the first half. Milk costs have fallen but production is higher and selling prices are lower. This has adversely affected profits in this product group," the company said in its statement Thursday.
However, the group said it expects some of the shortfall to be offset by higher property profits, which it said it now expects to exceed those of the first half.
Dairy Crest said it will issued its full year results for the year to end-March on May 21.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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