Dairy Crest chief executive Mark Allen has blamed its decision to sell its stake in Yoplait prematurely on soaring import costs in the yoghurt market.
Britain's biggest dairy business sold its 49% stake in Yoplait Dairy Crest to the Yoplait Group for £63.5m last week, allowing the company to reduce its debt and increase its headroom under banking covenants.
Although the joint venture had been due to run to 2012, current market conditions meant it made sense to sell now, Allen told The Grocer.
"Like all joint ventures there's a natural time for the parties to go their own way," he said. "We want to concentrate on the things we can control."
Yoghurts were heavily promoted, while the exchange rate would have affected returns further going forward, Allen claimed.
The sale meant Dairy Crest would now be able to focus on the core brands it owned outright, Allen claimed, although it would continue to distribute Yoplait products, including Petits Filous, Frubes and Yop, in Britain until March 2010. There were no plans to sell off any other assets, insisted Allen.
Dairy Crest's share of YDC's post-tax profit was £7.4m for the year to 31 March 2008, with a similar figure expected to be recorded for this year. Dairy Crest's net debt will now be recorded as £435m for the year to 31 March 2009.
The company's share price, which fell sharply late last year as the recession kicked in, rose to its highest point since early November this week following the announcement that net debt to operating profit ratio had also improved from 3.25 to 3.
The company reported last week that its full-year profits for the year ending 31 March would be in line with expectations, and that it would continue to focus on cash generation, market share and profit improvement.
Brands performed particularly well, with Cathedral City sales up 10% by volume and 20% by value to £190m and John Lydon-promoted Clover sales rising 25-30%.
Britain's biggest dairy business sold its 49% stake in Yoplait Dairy Crest to the Yoplait Group for £63.5m last week, allowing the company to reduce its debt and increase its headroom under banking covenants.
Although the joint venture had been due to run to 2012, current market conditions meant it made sense to sell now, Allen told The Grocer.
"Like all joint ventures there's a natural time for the parties to go their own way," he said. "We want to concentrate on the things we can control."
Yoghurts were heavily promoted, while the exchange rate would have affected returns further going forward, Allen claimed.
The sale meant Dairy Crest would now be able to focus on the core brands it owned outright, Allen claimed, although it would continue to distribute Yoplait products, including Petits Filous, Frubes and Yop, in Britain until March 2010. There were no plans to sell off any other assets, insisted Allen.
Dairy Crest's share of YDC's post-tax profit was £7.4m for the year to 31 March 2008, with a similar figure expected to be recorded for this year. Dairy Crest's net debt will now be recorded as £435m for the year to 31 March 2009.
The company's share price, which fell sharply late last year as the recession kicked in, rose to its highest point since early November this week following the announcement that net debt to operating profit ratio had also improved from 3.25 to 3.
The company reported last week that its full-year profits for the year ending 31 March would be in line with expectations, and that it would continue to focus on cash generation, market share and profit improvement.
Brands performed particularly well, with Cathedral City sales up 10% by volume and 20% by value to £190m and John Lydon-promoted Clover sales rising 25-30%.
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