British dairy group Dairy Crest has announced disappointing results for 2014, largely due to poor profits in its dairy business, which is currently in the process of being acquired by German dairy group Muller.
The company’s total sales were down in 2014 from €1,951m to €1,865m (-4%), with profits in the dairy group down by 90% from 2013, to €2.2m. The Cheese & Spreads group, which Dairy Crest is eager to build on once the Dairy business has been sold, announced a profit rise of +19%, from €78.7m in 2013, to €93.8m in 2014.
The global milk industry remains under pressure this year, as low milk prices, over-supply and changing consumer trends hit the bottom line for all milk producers.
Commenting on the results, Mark Allen, Chief Executive, said: “This has been another year of significant progress for Dairy Crest. We have grown combined Cheese and Spreads sales despite the deflationary market environment. We have also delivered an encouraging improvement in the combined margin of these businesses. Cathedral City has again outperformed and accounts for over 50% of retail sales of branded cheddar. Our focus on product development has underpinned these results and our investment in a new innovation centre will support this. We have again met our target to deliver annual cost savings of over €28m. These include consolidating our butter and spreads production onto one site.
We have agreed to sell our Dairies operations. The conditional sale is a positive development for Dairy Crest and the wider UK dairy sector. Shareholders have approved the sale and the process to obtain regulatory approval is on track. Completion of the sale will result in Dairy Crest operating from five well-invested manufacturing sites. It will be a much simpler, more focused, predominantly branded business. It will also have exposure to the growing infant formula category and emerging markets.
Looking ahead, Dairy Crest is well positioned for sustainable, profitable growth. Over the coming year as a whole we expect results to benefit from the continued growth of Cathedral City, ongoing cost savings and the completion of our project at Davidstow where we will add value to our whey stream by producing ingredients for infant formula. This growth will be second half weighted.
We expect that our net debt, which at the year-end remains within our target range, will fall once we have completed our major investment projects. The receipt of the proceeds from the sale of our Dairies operations will accelerate this reduction.”
The sale of Dairy Crest’s dairy business is in the process of a competition investigation, which could delay its sale to Muller until the latter part of this year, it was announced in March.
