cathedral city redesign

Dairy Crest has reported an uplift in profits in its first results since the sale of its liquid milk arm to Müller UK & Ireland.

The processor reported a 23% increase in pre-tax profits on continuing operations to £45.4m in preliminary results for the year to 31 March. Analysts said the growth suggested the business was starting to benefit from the disposal of its loss-making milk business last December

Operating revenues fell by 6% to £422.3m as a result of the ongoing difficulties facing the dairy sector, but cheese and whey trading profits increased by 10% as Dairy Crest became a “simpler, more agile and cash-generative business” said Shore Capital analyst Darren Shirley.

Volume sales for its four key brands - Cathedral City, Clover, Country Life and Frylight - were up 1.7%, althuogh value sales fell 2.3% as a result of deflationary pressures and challenging conditions in the BSM market.

However, Shirley said Dairy Crest was now “well positioned to drive growth through innovation across its stable of branded and value-added products”.

This, combined with “robust and sustained cash generatinon”, meant the business was well positioned to build and sustain an “attractive income stream”, he added.

SocGen analyst Warren Ackerman said the processor’s new demineralised whey and galacto-oligosaccharide operation should also “deliver a project payback” despite short-term weakness in the market.

Dairy Crest CEO Mark Allen said the results were in line with expectations.

“This is an exciting time to be leading Dairy Crest. Although we expect food price deflation to persist in the short term, the business is well positioned to deliver profitable and sustainable growth,” he claimed.

“We are making progress with all our four key brands and the continued investment we are putting behind them this year gives me confidence we can continue to grow their market share.”