Dairy Crest maintains full-year outlook despite ‘slow start’


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Dairy Crest maintains full-year outlook despite ‘slow start’
Dairy Crest’s expectations and financial position for fiscal year (FY) 2014 “remain unchanged” despite an overall fall in sales across its core brands in the first quarter.

In an Interim Management Statement published earlier today, the British dairy processor revealed that combined sales of its four core brands – Cathedral City, Clover, Country Life, and Frijj – had fallen by 4% in the three months ended 30 June 2013.

While Cathedral City and Clover both “outperformed their respective markets,”​ sales of Country Life Spreadable were flat, and Country Life block butter sales fell. Dairy Crest attributed the latter result to promotion cuts “following recent cream price increases.”

The company did not provide a sales update on Frijj, but said that promotions for the milkshake brand had also been scaled back to focus on upgrading manufacturing capacity and capabilities.

Despite this “tough consumer environment”​ Dairy Crest has maintained that its financial position “remains in line.”

“Our expectations for the full year remain unchanged,”​ said the Interim Management Statement.

Dairy Crest “off to a slow start”

As a result of this “slow start,”​ London-based stock brokerage, Panmure Gordon, has knocked £3m (US$4.5m) off its FY 2014 profits before tax (PBT) forecast for Dairy Crest.

“Dairy Crest’s Q1 IMS indicates a slightly disappointing start to FY 2014 with sales of its four key brands 4% lower than last year, albeit in line with management expectations,” ​said a note from Panmure Gordon equity research analyst, Damian McNeela.

“Lower promotional activity in Country Life block butter and Frijj more than offset the growth in Cathedral City and Clover.”

“In light of the slower start to the year we are pulling back our adjusted PBT forecasts by circa £3m to £63.9m,”​ McNeela added.

“Good progress” with whey projects

Meanwhile, Dairy Crest added that it is making “good progress” ​with its initiatives to increase the returns from whey and other added value products.

In its Interim Management Statement, Dairy Crest revealed that it is in talks with “several prospective partners​” in regards to the manufacture of demineralised whey powder.

“We have been considering how we can add greater value to the high quality whey stream at our Davidstow creamery. We are now clear that our chosen route is to make demineralised whey powder. This is a base ingredient for baby food – a rapidly growing market with significant potential.

“We expect this project to generate attractive returns for shareholders. We are currently finalising the necessary investment required to move this forward and are talking to several prospective partners,” ​said the company statement.

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