Dairy Crest has announced that aggregate sales of its four key brands grew by 4% in the 3-month period to June 30 compared to the first quarter of 2013/14. Cathedral City, Country Life and FRijj each grew sales by more than 5%. The exception was Clover where sales continued to fall in a difficult spreads market. The company said that it expects the performance of this brand to benefit over the remainder of the year from the television advertising that is scheduled for the second quarter, noting that it also remains on target to complete the rationalisation of its spreads and butter manufacturing facilities and close the Crudgington site this year.
One of the elements of Dairy Crest’s plan to improve the profits in its dairies operations is to grow FRijj, which the company claims is already the market leader in the ready to drink flavoured milk market. FRijj is said to have increased its presence on retailers’ shelves in recent months and secured a greater share of display. New coffee flavours are also contributing to its growth.
The second element to the company’s dairies plan is to reduce costs. Across the business as a whole Dairy Crest said that it is on target to again reduce costs by £20 million this year, with dairies benefitting most. The focus is on reducing distribution costs and the company said it has made good progress in the period.
Thirdly, Dairy Crest said that it aims to maximise profits from the sale of surplus properties. As previously reported, in this period it has completed the sale of a redundant depot in Surbiton, Surrey resulting in a profit on disposal of £4.9 million. The company now anticipates full year profits from sales of redundant distribution depots will be in the range £10 million to £15 million.
Despite progress with these three elements of its plan, Dairy Crest said that profits in in its dairies product group have remained under pressure as it maintained high milk purchase prices during the quarter despite lower cream revenues. Although the company said that it has now reduced the price paid for milk for dairies, profits in this product group will be second-half weighted and property profits will make up a larger part of total profits than originally anticipated.
At the end of the first quarter, Dairy Crest said that its financial position remains in line with its expectations and the outlook for the full year remains unchanged.
As announced earlier this month, the company’s £45 million investment to manufacture demineralised whey at Davidstow remains on track and it is working closely with its partner, Fonterra, to maximise the potential returns from both this investment and from the newly announced £20 million investment to manufacture galacto-oligosaccharide (GOS).
Dairy Crest expects to issue its half-yearly trading update on 22 September 2014 and its Interim Results for the six months ending 30 September 2014 on 6 November 2014.
