Dairy Crest brands hold up profits
in line with predictions, despite tough conditions on the UK dairy
Dairy Crest's share price made a flickering recovery this week, rising four pence to 485.5p, after the group said full-year profits would be in line with expectations.
A strong array of brands across the dairy sector, including omega-3 milk, Cathedral City cheddar and a joint-licence on Yoplait, helped Dairy Crest to fend off pressure on the dairy industry.
Britain's dairy processors have faced a particularly tough margin squeeze over the last year, caught between large supermarkets and soaring costs for energy and plastic.
Dairy Crest's statement suggests an improvement from its first six months, which the firm's saw sales creep up but profits crumble by half.
The group has continued to make strides in the branded dairy sector, re-launching its St Ivel Gold spread with omega-3 and also a blended cheese range called Over the Moon.
The firm said its other spread brands, Clover, Utterly Butterly and Country Life had all gained market share. Cathedral City, meanwhile, remains Britain's most popular cheddar cheese, with retail sales passing the £100m mark last year despite the brand becoming more expensive.
Dairy Crest's branded portfolio has helped it to sneak ahead of rivals Arla Foods UK and Robert Wiseman.
David Hallam, an analyst at Williams de Broe, told DairyReporter.com around two thirds of Dairy Crest's portfolio consisted of added value or branded products.
The group achieved the highest returns on sales, capital and milk processed on the UK dairy market in the 2004/05 financial year, according to newly released figures from the Milk Development Council.
Rising costs, however, have remained a significant challenge, said Drummond Hall, Dairy Crest's chief executive.
Rising input costs have hit UK dairy processors severely over the last year. Dairy Crest rival Wiseman gave an insight into the problem last autumn, announcing HDPE resin, which it uses to make its milk containers, rose by more than £200 per tonne, or nearly a third, in October alone.
At the other end, meanwhile, negotiations with supermarkets over milk supply contracts caused disruption to processors in 2005.
Dairy Crest found itself down 110m litres down on previous contracts, and had to wait until October for a new deal with Morrison's to begin.
Dairy Crest will release its full results on 24 May.