SUBSCRIBE

Breaking News on Dairy Processing & Markets

Sectors > Fresh Milk

Dairy Crest expects £5m annual saving through management shake-up

By Mark Astley , 19-Feb-2013

Dairy Crest has announced a board and senior management shake-up – a move the British dairy processor anticipates will lead to cost savings of at least £5m per year.

From 1 April 2013 – the start of the new UK financial year – Dairy Crest will begin the consolidation of its business into a “single structure focused on consumer driven growth with an integrated supply chain.”

Under the reshuffle, Mike Barrington and new HR director Robert Willock will replace Arthur Reeves and Roger Robotham on the company’s management board. Meanwhile finance director Alastair Murray and managing director Toby Brinsmead will leave the business. Director of financial control, Tom Atherton, will replace Murray.

Mark Allen, Martyn Wilks and Tom Atherton will hold executive director positions on the board from 23 May 2013.

According to Dairy Crest, the reorganisation is “consistent” with its long-term strategy to drive efficiencies and build added-value sales.

“Simplification” reflects focus change

Earlier this month, Dairy Crest reported that it was on track to exceed its annual cost saving target by delivering savings of around £23m for the year ending 31 March 2013.

Over the last 12-months, Dairy Crest has executed a number a cost-cutting measures in an attempt to improve the efficiency of its business.

In a note, British stockbrokerage Shore Capital recognised the reorganisation as the latest attempt by Dairy Crest to improve its efficiency and business focus.

“The simplification reflects the changes throughout the group in recent years, which, amongst other things has resulted in the disposal of the St Hubert and Yoplait businesses, the closure of the Aintree and Fenstanton Dairies and the announced consolidation of the spreads manufacturing into Kirkby, resulting in the closure of the Crudgington site,” said the note.

Contract retention provides “security”

Alongside its reorganisation plans, Dairy Crest announced today that it has retained its contract to supply liquid milk to British retailer Sainsbury’s following a “competitive process.”

The new three-year contract will come into effect from February 2014.

Shore Capital has heralded the new contract as “excellent news” for Dairy Crest.

“That Dairy Crest is able to announce it has retained its contract to supply Sainsbury’s represents excellent news for the group, in our view, particularly given concerns by some in the market (not by us it must be said) that Arla would seek to fill its new 1bn litre per annum milk facility, which is due to open in summer 2013, with volume wins at Dairy Crest’s expense,” said the Shore Capital note.

“We believe the retention of the Sainsbury’s contract and volumes, which we estimate represent circa 30-35% of Dairy Crest’s retail milk business, provides considerable additional security to existing forecasts, rather than upside or downside potential.”