7th Nov 2013 10:35
LONDON (Alliance News) - British dairy products company Dairy Crest PLC Thursday reported a first-half pretax profit, compared to a loss last year due to huge financing and operating costs.
The diary products company, which is known for brands including Cathedral City cheddar cheese, FRijj milkshakes, and Utterly Butterly spreads, said that it remains confident in meeting full year trading expectations.
Dairy Crest increased its interim dividend by 3.5% to 5.9 pence per share, as it reduced its cost base and saw growth in its key brands.
It also said that it is currently ahead of its annual cost reduction target of GBP20 million.
Dairy Crest reported a pretax profit of GBP19.7 million for the six months to September 30, compared with a loss of GBP13.1 million a year earlier, associated with a large amount of financing and operating costs last year.
However, the group reported a much lower net profit of GBP17.9 million, compared with GBP45.2 million the prior year, due to GBP54 million in profits from operations that were sold off last year, including delivery depots it no longer needed.
Dairy Crest said revenues from continuing operations for the first half of the year also fell to GBP672.2 million, down 2% from GBP688.2 million a year earlier, due to lower spreads and milk volumes.
Dairy Crest said that sales from its four key brands including Cathedral City, FRijj, and spread brands Country Life and Clover, were up 1% in the first half, despite trading against a tough comparative period last year, when sales were up 11%.
The group said that its cheese business increased revenues and profits in the first half, driven by a strong performance from its Cathedral City brand, which saw sales increase 9%.
It said it expects its cheese business to continue to perform strongly in the second half of the year, boosted by new product launches. Higher volumes also helped to drive down unit costs at its two packing plants.
However, Dairy Crest said its spreads business reported lower profits due to high cream prices and a challenging butters and spreads market.
It said that block butter sales and market share are down significantly for its Country Life brand, largely due to lower promotional activity. It said that overall Country Life sales were down 17% compared to the first half of last year.
It said that as expected, FRijj sales were down 17% in the period, as it scaled back promotions during the upgrade of its production capacity and capability. However, it said that it expects a better second-half performance for the brand, due to the new production line, and said the brand will be in growth for the year as a whole, with sales up significantly in October compared to last year.
Dairy Crest said that it is continuing to invest around GBP45 million to manufacture demineralised whey powder, a base ingredient used in baby food, and expects production to begin in the first half of 2015. It said that the project will have a five-year cash payback, and expects it to boost annual operating profits by more than GBP5 million.
The group said its net debt increased significantly during the period, to GBP192.3 million from GBP75.8 million, due to payments made to its pension fund and to redeem loan notes, as well as the normal outflow of working capital.
Dairy Crest shares were down 0.7% Thursday morning, trading at 535.00 pence per share.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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