22nd Sep 2014 07:42
LONDON (Alliance News) - Dairy Crest Group PLC Monday said it expects its first-half profit to be broadly in line with last year, but said it will be closing several of its production facilities in response to weaker demand.
In a pre-close statement, the dairy foods company said it will be closing its glass bottling dairy in Hanworth, West London and its specialist cream potting facility in Chard, Somerset.
"The proposal to end production at Hanworth, which currently employs around 200 people, follows a strategic review of the company's residential delivery service and is necessary to protect the long-term future of this business. It reflects reduced demand for milk in glass bottles," the company said in a statement.
Dairy Crest said the proportion of milk put into glass bottles has fallen to just 4% in 2012, compared with 94% in 1975.
The company said it has started consultation with its employees regarding the factory closures.
It said it expects the Hanworth site to remain operational for another two years, during which production at the company's three plastic bottling dairies at Chadwell Heath, Foston and Severnside will be stepped-up to meet the demand from residential customers.
Dairy Crest said the closure of its Chard site, which employs around 60 people, will come in the second-half of 2015.
"Our decision to consult with employees at Chard is an economic one. We have tried to make this site viable for many years but regrettably this has not proved possible despite the best efforts of a dedicated workforce," said Chief Executive Mark Allen in a statement.
In a separate statement Monday, Dairy Crest said it will also close its Crudgington butter and spreads factory early in the second-half of the year. It said the exceptional cash costs associated with the closure of those sites, will be around GBP15 million over the next two years. It said the site closures will help towards reaching its cost saving target of GBP20 million a year.
"However we anticipate that proceeds from the sale of these and other previously closed processing sites will exceed this amount. There will also be non-cash asset write-downs associated with the closure of Hanworth and Chard of around GBP10 million this year and GBP5 million in subsequent years," the company said.
Dairy Crest said that in a "challenging trading environment" it expects to report a first-half profit for the six months to September 30, broadly in line with last year. In the first-half of last year, it reported a pretax profit of GBP19.7 million and an adjusted profit of GBP21.9 million.
The company said sales of its four key brands - Cathedral City cheese, FRijj flavoured milkshake, and spreads Clover and Country Life - are up around 4% in total over the first-half.
"In the current challenging trading environment overall we continue to perform in line with our expectations... We continue to take the difficult decisions that are necessary to drive the business forward," said Allen.
Dairy Crest shares were trading 1.4% lower Monday morning at 403.95 pence.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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