Dairy Crest has delivered a steady performance during the six months to 30 September, and its full-year profit expectations are unchanged, the company has said in a trading update.
Overall, sales of its four key brands – Cathedral City, Frijj, Country Life and Clover – were expected to be “broadly the same” as they were during the six months to 30 September 2011, when year-on-year growth stood at 11%.
However, different parts of Dairy Crest have put in varying performances. Cheese was thriving, with Cathedral City sales expected to outperform the market and do better than last year, the company said.
Butter and spreads, on the other hand, had proved more difficult – higher input costs had affected profitability, and while Clover sales were set to be “broadly unchanged”, Country Life sales would be lower year on year “as a result of less promotional activity”, Dairy Crest said.
“The butters and spreads market has been particularly difficult. We have offset pressures there by growing our cheese business”
Frijj sales would also be lower year on year because Dairy Crest had to scale back promotions as it upgraded its production capacity and capability. This work was set to be completed in October, the company said, “and we expect an improved performance in the second half”.
Overall, Dairy Crest’s liquid milk business continued to make progress towards its medium-term target of achieving a 3% return on sales, the company said, “although reported first-half profits will be impacted by lower profits from property sales, which this year will be weighted to the second half”.
However, underlying performance had improved, thanks in part to higher returns from bulk cream markets, the company added. “They have also enabled us to pay farmers more for their milk across all our milk purchasing contracts.”
Cost reduction remained a key focus, Dairy Crest added, with annual savings of £20m across the group expected.
CEO Mark Allen said: “The butters and spreads market has been particularly difficult. We have offset pressures there by growing our cheese business, reducing our cost base and improving the underlying performance of dairies.”
Work on the company’s new whey plant at Davidstow – which will give Dairy Crest access to the lucrative infant formula market – was progressing, and production was set to start during the first half of 2015, the company added.
Dairy Crest will report its first-half results on 7 November.