Pre-tax profits at Dairy Crest have taken a 16% hit as a result of poorer performance within the company’s cheese and dairies divisions and restructuring costs.
Adjusted profit for the period fell 16% to £19.1m in the six months to 30 September as turnover fell 7%, to £688.2m, the company announced in its interim results this morning.
Within cheese, revenues increased by 10%, reflecting growth in Cathedral City volumes and higher selling prices, but profits decreased 5.5%, to £15.6m. In Dairies, profits fell 63.8%, to £2.1m.
Despite an 11.2% increase in its spreads division, and a lower loss sustained in its ‘other / associated’ division, overall operational profits fell 10.1%, to £29.4m. Pre-tax profit of £19.1m was achieved after the addition of exceptional items including profits from the sale of its French St Hubert spreads business.
The company also incurred substantial restructuring costs of £29.7m in the period, which affected profit.
Despite the “challenging environment”, Dairy Crest had continued to grow its key brands - its four key brands (Cathedral City, Country Life, Clover and Frijj) were collectively up 11% in value sales and 10% by volume - said chief executive Mark Allen. “We now have the ability to make UK acquisitions , but we will take time to ensure that any transaction creates value for our shareholders.” The sale of St Hubert - for €430m - had generated a £47.7m post-tax profit, strengthened the company’s balance sheet and created a more focused business, he added.
The company’s balance sheet is also considerably stronger, having reduced net debt from £365.3m at 30 September 2011, to £75.8m at the end of this period.
Stockbrokers Shore Capital flagged its confidence in Dairy Crest stock as a result of structural changes the company had made in the results period. “We believe that with its more robust constitution, noting as we do depleted profits through restructuring charges in the near-term, Dairy Crest stock is a solid hold,” said analyst Clive Black.
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