Dairy Crest defies costs in profit drive

By Neil Merrett

- Last updated on GMT

Related tags Dairy crest Milk

UK-based Dairy Crest says that is full year financial expectations
remain unchanged following its third fiscal quarter despite
increased milk costs and a £9.4m (€12.6m) fine for alleged
anti-competitive practices.

The cooperative said that a 40 per cent increase in sales from its food division and increased prices for its products has allowed the group to stay on the track to meet full year profitability.

Group chief executive Mark Allen said the group's core brands had been key contributors to the strong performance.

" We are again pleased with the strong performance of a number of our key brands including Cathedral City, Utterly Butterly, Petits Filous and St Hubert Omega 3" he stated.

Despite the challenging market conditions our expectations for the full year remain unchanged."

Dairy Crest praised its Cathedral City cheddar was as a significant earner over the period, posting double-digit growth that amounted to £150m (€201m) in retail sales.

The cooperative added that it had also managed to put difficulties related to the production of its clover spreadables range behind it, and could therefore begin promoting the product again during the final quarter.

Sales volumes for the spread brand were negatively impacted in the first fiscal half, after the company was forced to recall the product in May amidst fears of mould contamination.

Revenues were also up for the group's dairy division, which rose 13 per cent over the three months.

Dairy Crest attributed the growth to strong volumes sales over the Christmas period and the impact of price increases.

The price hikes reflected the higher cost for raw milk, the group said.

Dairy Crest added that as of December 2007 onwards, it had also implemented a raw milk price increase on liquids contracts of 0.4 pence per litre in a bid to support its farmers.

For the company's home delivery service, Dairy Crest said a new internet-based ordering system fro consumers was progressing well, with the group looking to extend into the Bristol area.

The period was not without its difficulties for the group though.

In December, the company reached an early resolution agreement with the UK office of Fair Trading (OFT) after alleged price fixing between 2002 to 2003.

Dairy Crest said that the agreement meant that it now expected to pay a significantly reduced fine of about £9.4m over the investigation into its "milk price initiatives".

The amount will be deducted as an exceptional item during the current financial year ending 31 March 2008, the company said.

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